Consumer Financial Protection Bureau Proposes New Rules to Combat Improper Debt Collection

Recent reporting by The Hill reveals that the Consumer Financial Protection Bureau (CFPB) has proposed new changes to the ways that debt collectors may contact consumers. The proposed rule changes also limit litigation that Debt Collectors may initiate as well as what information they may refer to Credit Reporting Agencies.  Debt collectors have long harassed and abused consumers.  These days, with the COVID-19 virus, they have the ability to run rampant.

The report goes on to detail how CFPB Director Kathy Kraninger hopes to clarify communications rules for the digital age. The proposed rules are currently in the 90 day comment period and will take effect next year.

With the advent of social media, debt collection rules need to be updated to keep up with new forms of communication. The proposed rules include rules around email, cell phone, text message, and social medial contact by debt collectors. The rules also restrict the ability of debt collectors to contact consumers through a work email. Consumers will even be able to unsubscribe from some forms of communication from debt collectors.

The report also notes that in addition to limits on the frequency of contact a debt collector can make, debt collectors will also be barred from threatening legal action for Zombie debt. That is debt that is past the statute of limitations for a lawsuit. Many debt collectors use various tactics to try to revive this debt and trick consumers into reopening the statute of limitations. These rule changes will make that much harder to do.

The full and exact text of the rule changes is unclear as of The Hill’s reporting as it has not been entered into the Federal Register. A May, 2019 proposed rule change relating to Zombie debts saw its public comments period extended into June due to the COVID-19 outbreak. This rule change detailed here in the federal register was set to see it’s comment period close on May 4, 2020.

Under this proposed rule debt collectors will be required to go into much greater detail as to the rights of the consumer faced with a zombie debt claim by a debt collector. The debt collector must disclose that the statute of limitations has run and what actions by the consumer can get the statute of limitations restarted.

The CFPB proposed rule change notes that statutes of limitation vary between states but typically a debt stays valid for suit between three and six years but can last as long as fifteen years depending on the state and type of debt. The CFPB notes the two most common ways that Zombie debt is revived. First, by partial payment of the debt. Second, by a written acknowledgment of the debt.

The CFPB explains the court’s reasons for letting a lawsuit go ahead after the time for a debt collector to sue has run out. The idea is that either the consumer continues to acknowledge the debt and its validity or the consumer accepts that they had a moral obligation to pay off the debt. The CFPB in the May, 2019 proposed rules notes that zombie debts have usually been sold through a string of debt collectors often for a fraction of the debt’s face value.

The Hill’s report notes that the most recent rule changes for debt collection through new communications modes have yet to be entered into the federal register, so their reporting is the best source of information until that happens.

The new rules limiting debt collection practices are a good step in combating predatory debt collection s. However, to protect yourself, you must be fully informed of the evolving rules, which can be difficult for citizens to keep up with. Only by fighting back against debtors who are pushing the envelope, can real change be accomplished, and can justice be rendered against those who attempt to flout the system.

If you are being harassed by a debt collector, contact us at Credit Repair Lawyers of America.  We can stop the harassment and make the debt collector pay you damages.  Call us today for a free, no obligation consultation at (855) 956-2089 or email Attorney Gary Nitzkin (licensed in Michigan only) at gary@crlam.com.  We have attorney relationships around the country to help.