Dear Director Cordray,
We write regarding your Advanced Notice of Proposed Rulemaking (ANPR) on debt collection practices. Repeatedly, we are presented with stories from our constituents about unfair, deceptive, and abusive behaviors by those seeking to collect on a debt. Thankfully, in many instances, the Fair Debt Collection Practices Act (FDCPA) imposes meaningful restrictions on the tactics that third-party debt collectors can employ and enshrines important rights that consumers can assert to protect themselves. In other cases, however, the protections, rights, and tools that consumers enjoy under the FDCPA may be insufficient in both strength and scope. Accordingly, we urge the Bureau to use its rulemaking to address the following issues in order to set tighter standards for debt-collection practices and to give consumers better tools to protect themselves:
First, the Bureau should extend the FDCPA's prohibitions on deceptive, harassing, and abusive communications to cover original creditors. Such communications practices that are already banned for third-party debt collectors -- including but not limited to visits to home and workplaces, communication with third parties, caller ID masking, and repeated or late-night phone calls intended to harass -- should also be off-limits for original creditors. We recognize that certain creditors, such as small financial institutions, have ongoing communications with their customers that may or may not involve debt collection. While new rules should allow for such routine and ongoing communication, no consumer should face the prospect of strangers knocking at their door or confronting them in front of bosses or coworkers in an effort to collect on a debt. These practices -- along with all deceptive, harassing, and abusive tactics -- are clearly over the line and should be banned for all debt collection, no matter who is doing the collecting.
Second, the Bureau should also pay special attention to strengthening key protections for servicemembers that may not currently apply to their dealings with original creditors. In recent testimony before the Senate Banking Committee, the Bureau's Assistant Director of Servicemember Affairs, Holly Petraeus, related a particularly galling example of intimidation: collectors seeking to intimidate servicemembers by contacting their commanding officers. In the absence of the servicemember's express consent, we believe such actions would already be prohibited for debt collectors under the FDCPA's limitations on communications with third parties. But we also urge the Bureau to explicitly ban such intimidation tactics for original creditors, as well as to tighten the rules governing whether, when, and how creditors can seek to secure such consent in advance through contracts.
Third, even for third-party debt collectors already covered under the FDCPA, existing bans on unfair and deceptive practices must be strengthened to explicitly cover a number of misleading promises, threats, and traps. These include but are not limited to (a) misleading consumers about the effect of payment or non-payment on their credit report; (b) seeking to collect on a time-barred debt by threatening consumers with actions, such as lawsuits, that collectors are not legally entitled to take under state law; and (c) luring unsuspecting consumers into reviving their own liability for time-barred debt through partial payment or acknowledgement. While the Bureau's recent enforcement action against American Express for false claims about credit reporting was a step in the right direction, we urge the Bureau to go further in its rulemaking by explicitly prohibiting these and other deceptive practices.
Fourth, we urge the Bureau to set higher standards for the information provided about debts by debt collectors. In many instances, particularly involving medical debt, collectors forward derogatory information to a consumer reporting agency before a consumer has even had the chance to learn or pay what they personally owe. We believe this should be categorized as an unfair practice as prohibited by Dodd-Frank. The Bureau should therefore require collectors of medical debts -- and other debts passed on to a debt collector or debt buyer more quickly than the standard 180 days -- to provide consumers with specific information about the debt and a reasonable time to pay before communicating with consumer reporting agencies.
Fifth, consumers must be made better aware of their rights. When communicating by phone, collectors should be required to notify consumers orally of their rights to request an end to communication, dispute the debt, or refuse to pay a time-barred debt. To ensure consumers can understand the written information they receive, the Bureau should also write a clear, standard "Know Your Rights" disclosure that all collectors must provide to consumers upon their first written communication, and ideally before any oral communication.
Finally, when consumers do believe their rights have been violated, the Bureau's rules should allow them to hold collectors accountable for each such violation. Given the FDCPA's maximum statutory damages of merely $1000 -- unchanged since the law passed in 1977 -- many debt collectors may now feel they have a financial incentive to be non-compliant in many cases. By making debt collectors liable for each individual violation, the Bureau will ensure that a strong incentive is in place to comply with the law.
Thank you for your attention to this matter. We commend the Bureau for taking on this issue, and we look forward to working with you to ensure consumers are protected from deceptive, harassing, and abusive practices.