Across the country, we continue to hear about serious problems with debt collection – debiting accounts without authorization, excessive and harassing phone calls, calling at all hours of the day or night, threats of arrest or criminal prosecution, threats of physical harm to consumers.
In the United States today, debt collection is a $13.7 billion industry. We handle more complaints about debt collection than about any other financial product or service, and the numbers keep growing.
- We estimate
that about one in three consumers, more
than 70 million people, were contacted by a creditor or collector seeking
to collect a debt within the past year.
- We have handled
about 250,000 debt collection complaints
since 2011 and have handled about 85,000
in 2015 alone.
- We have ordered creditors and debt collectors to refund hundreds of millions of dollars through our enforcement actions against unlawful debt collection practices since 2011
The largest segment of complaints we have received had to do with continued attempts to collect a debt that the consumer said was improper, because it was not their debt in the first place or because it had already been repaid or discharged in bankruptcy.
We are listening.
We know that debt collection is a money issue that can feel especially overwhelming and we want you to be treated fairly. The story of how a financially struggling consumer gets to the point of falling behind on financial obligations can reflect all the many struggles of the human condition. Some people experience a larger tragedy like job loss, illness or injury, or the upset of divorce. Others may come across bad luck or stem from choices that don’t work out as hoped. Those dealing with debt are already living in the shadow of stress. This worry increases as they experience the new challenge of the debt collection process.
We recognize that debt collection serves an important role in the proper functioning of consumer credit markets. If people owe money that they borrowed they are obligated to pay the money back and they should do so. But for many understandable reasons, huge numbers of Americans fall behind on their debts at one time or another. When the creditor’s efforts to collect a debt on their own are not successful they may sell off the debt. This typically means they have given up trying to recover the money and have settled for getting what they can by selling the remaining debt, perhaps for pennies on the dollar. The new debt owner then has the legal right to seek to collect the full amount of the original debt. They might do so by reporting the debt to the credit reporting companies, which creates pressure to pay it off, or by filing a lawsuit against the consumer.
Right person, right amount
When companies begin collection, they may have only received basic data – for example, name and address and an amount claimed to be due. Often, when debts are sold, information does not carry over or is incomplete, and anything a consumer had submitted may not be passed along. This may create inaccuracy.
Dignity and respect
Consumers need to understand what the collector is doing and why. Consumers also need protection when it comes to what, when, where, and how collectors communicate with them. Debt collectors are generally prohibited from engaging in acts that harass, oppress, or abuse consumers. But many consumers still complain about frequent or repeated phone calls; debts that are wrongly disclosed to third parties; and contacts at inconvenient times or places, such as when they are in the hospital. Consumers deserve respect and businesses should be able to operate fairly and reasonably to collect the debts they are legitimately owed.
Without clear rules of the road that can be effectively enforced in an even-handed manner, the companies that try to collect debts in the right way will have trouble competing against others that are willing to bend the rules or push the limits of the law to get an advantage.
That’s why we are considering a proposal to strengthen protections and help bring clarity to these tough situations. Today, we outlined proposals under consideration that would overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt. Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect. As they are collecting, companies would be required to limit communications, clearly explain debt details, and make it easier for consumers to dispute the debt. Then, when responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence. These requirements and restrictions would follow the debt if it is sold or transferred.
If you're having trouble with debt collection, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).