New rules would reduce hounding by debt collectors

The nightmares begin with incessant hounding by collection agencies. A threatening letter. Another. Then the calls, one after another, sometimes several in a matter of a day, even an hour. For those who fall behind on a payment may find the company to whom they owe the money has sold that debt to a collection agency of some kind, and that’s when things can get bad for an individual and family.

And when it comes to collection agencies, here’s the most annoying problem: Sometimes, the people who are being hounded because of a debt don’t even owe it. They may be the victims of mistakes on the part of the collector, but the collector refuses to believe the innocent “debtor” and continues harassment. A good credit rating can be ruined by an unscrupulous collector, who has “bought” the debt for cents on the dollar.

Enter the Consumer Financial Protection Bureau, created in 2010 as part of reforms in the wake of the Great Recession. The CFPB, the creation of which was fought hard by banks and credit card companies, is supposed to watch out for the welfare of individuals caught in some whirlwind of abuse by banks or credit card companies, or debt collectors.

And now the agency has offered proposals for new rules to ease the pain for those being pursued by debt collectors, by requiring more of collection companies.

The rules include: 1. The collector would need to know all the details of a debt, including the account number, the date of default, amounts paid. In other words, before the debt could be pursued, the collector would need more than a name and a phone number, which is all some have. 2. Collectors would have a cap on the number of times they could call someone in a single week. 3. Collectors would have to tell people if the debt in question had outlasted the statute of limitations — in which case, the debtor wouldn’t be subject to a lawsuit.

In general, the rules would put more responsibility on collectors for disclosing all the available information about a debt. All the nightmares wouldn’t end, but things would be better, and these changes are long overdue. The CFPB is also going to issue proposals for regulations on the ways financial service agencies like banks and credit card companies go about collecting debt themselves. Again, this is welcome, but more rules are needed.

This story was originally published July 28, 2016 at 7:35 PM with the headline "New rules would reduce hounding by debt collectors."