Rules would limit harassment by debt collectors

The Consumer Financial Protection Bureau is taking its first step toward reining in debt collectors, releasing an early outline of rules aimed at preventing them from harassing consumers and trying to collect debts that don’t exist.

The proposal, discussed Thursday at a CFPB hearing in Sacramento, Calif., would require collection companies to do more to verify information about debts before contacting consumers, limit the number of times a collector can call or email consumers, and make it easier for consumers to dispute debts and put the collections process on hold.

Consumer advocacy groups have long complained about the practices of debt collectors, saying they often try to collect from the wrong people, intimidate consumers with nuisance lawsuits and harass borrowers with constant calls.

“We continue to hear about serious problems with debt collection — debiting accounts without authorization, calling at all hours of the day or night, threats of arrest or criminal prosecution, or threats of physical harm to consumers and even their pets,” CFPB Director Richard Cordray said in remarks prepared for Thursday’s hearing.

Consumer groups called the proposal a good first step. But, as with other CPFB proposals, they say they would like to see more stringent consumer protections.

A trade group for debt-collection firms, meanwhile, said rules that go too far could prevent some borrowers from getting loans in the first place.

“If creditors are not able to collect rightfully owed debts, they will be less likely to extend credit to consumers,” said Cindy Sebrell, a spokeswoman for trade group ACA International.

The proposal, released late Wednesday, is an early step in a process that could take more than a year to produce final rules. The CFPB’s initial outline will be reviewed by a panel of small debt-collection businesses before more formal rules are proposed, likely sometime next year.