Debt collector rules could allow unlimited texts and emails to consumers: "We are horrified"

Debt collectors could soon get an all-clear to text, email and private-message consumers who have fallen behind in debt repayments -- on an unlimited basis. Consumer groups decried the proposed rule, saying it will enable harassment of consumers through electronic communications as well as phone calls.

The change is part of a proposed rule from the Consumer Financial Protection Bureau, which is seeking to update the Fair Debt Collection Practices Act passed in 1977. Consumer advocates and debt collectors alike say the law is far overdue for an update, given that faxes and phone-answering machines were cutting-edge technology at the time. 

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Yet the proposed law, released on Tuesday, raises concerns for consumers and privacy advocates, given that the update would allow debt collectors to bombard consumers with texts, emails and even private messages on social media services such as Twitter. Debt collectors say they need to access consumers through these communication methods because more people are shunning phones, especially millennials and younger consumers. 

While the proposed law would limit debt collectors to seven calls per week per debt, one consumer advocacy group said debtors could still feel ambushed, especially when combined with texting and emailing.

"We are horrified that the CFPB's proposed rule will actually authorize harassment of consumers through phone calls, emails and texts," said Margot Saunders, an attorney at the National Consumer Law Center, in an emailed statement. 

Even limiting debt collectors to seven calls per week could prove to be overwhelming for some consumers, the National Consumer Law Center said. For instance, a student with eight loans could receive 56 calls each week, the group noted. 

First, a 90-day comment period for consumers

Consumers have 90 days to comment to the CFPB on the proposed rule after it is published in the Federal Register. 

"i would be surprised if that's not a topic of significant comment" in the comment period, said David Monteiro, a partner at law firm Morgan Lewis. "Each of the topics that the proposed rule addresses are issues that have been ambiguous under the statute for the last 40 or 41 years, and it's helpful to everyone to have those ambiguities resolved."

Nevertheless, the Fair Debt Collection Practices Act's prohibition against harassment would still stand, which means a debt collector can't send so many texts or emails that a consumer would consider it abusive, he added. The CFPB said in an emailed statement to CBS MoneyWatch that debt collectors would face liability "if the consequence of the communications is harassment, oppression or abuse of any person."

It's not clear that consumers will welcome the changes, given that debt collectors are already one of the most complained-about financial players to the CFPB. In 2017, the agency recorded 84,500 complaints about the debt-collection industry. About one out of five complaints are linked to "communication tactics" of debt collectors, the CFPB found in a 2018 report. 

Opting out from collection agency texts or emails

Consumers will have some options for cutting off excessive texts or emails, however. The rule would allow consumers to tell a debt collector to stop contacting them at a particular email address or text number, for instance. 

Even though the proposed law would limit the number of phone calls from a debt collector to seven  per week, that cutoff is already being decried by the debt-collection lobby, which called it an "arbitrary" number. 

"We think there are several areas that need to be clarified and improved upon before the rule is finalized, including the arbitrary limit on call attempts that could unnecessarily impede communications with consumers," Mark Neeb, the CEO of the Association of Credit and Collection Professionals, the trade group for the debt-collection industry, said in an emailed statement.

Debt-collection agencies: a near-$11 billion industry

There's a lot of money riding on the new rules, as debt collection is now a $10.9 billion industry that employs almost 120,000 workers at debt-collection agencies and other companies. Since the financial crisis, American consumers have taken on more debt, with some delinquencies, such as for auto loans, steadily increasing despite unemployment shrinking the past decade. 

The proposed rule may add fuel to critics' concerns that the CFPB has lost its appetite for going after financial abuses by corporations under Trump administration appointees. Its current director, Kathy Kraninger, has signaled the bureau will take a more business-friendly approach under her leadership.