What the new debt collection rules mean for you

Sean Pyles

Working with third-party debt collectors can be confusing and scary. For the more than 68 million American adults with debt collection, knowing their legal rights is crucial.

The Fair Debt Collection Practices Act covers third-party debt collectors – those who purchase overdue debt from an original creditor, such as a credit card company. An update to the enforcement rules, announced in late October by the Consumer Financial Protection Bureau, changes the terms of engagement.

Some changes will modernize the law and clarify how it is enacted. But consumer advocates say further revisions don’t go far enough or could have unintended consequences.

Know your rights

The FDCPA offers several protections, including:

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Limits of debt collection actions

Collectors must be truthful, including about debt details. They cannot use abusive language, call repeatedly in a harassing manner, or threaten violence.

Collectors may not request a post-dated check for the purpose of threatening or initiating criminal action. They also cannot collect more than the amount owed or threaten to seize the property when this is not allowed.

Disclosure of information

Collection agents must send consumers a “debt validation letter” outlining important details, including the amount owed, the name of the collection agency, and how consumers can dispute the debt.

Consumer rights

People can limit how and when a collector contacts them, including telling them to stop communicating altogether. In all but limited circumstances, the collector must honor this request.

If consumers are unsure of the details of a debt, they can send the collector a debt verification letter requesting more information beyond the validation letter.

FDCPA Rules Updates

Here are some of the changes that are expected to go into effect in fall 2021:

New communication possibilities

Debt collectors will be able to contact consumers via email, text and social media posts. The messages must explain how the consumer can restrict contact by these methods or request no communication. Notably, debt collectors do not need consumers’ permission before contacting them on these new channels.

Consumer rights advocates fear collectors may send crucial information such as the debt validation letter to emails or social media accounts that are not being used.

“What consumers need to know is that it will be very important for them to be proactive about opting out if they do not want to receive text or email communications,” says April Kuehnhoff, attorney at National Consumer Law Center.

She also notes, “If consumers start receiving communications from a debt collector and you haven’t received the initial notice of the debt, they should request this information.”

New limits on the actions of collectors

Additional changes are expected to be announced by the CFPB in December. These will govern when collectors can add information to consumer credit reports and debt disclosures, such as whether they’ve passed the statute of limitations, which vary by state and limit how long a collector can sue a consumer for payment.

Why Consumer Advocates Matter and What You Can Do

Some advocates worry the updates don’t go far enough and say some of the changes could actually reduce consumer protections. Here are two of the main concerns:

Communication frequency

The update clarifies the definition of a “harassing” frequency of phone calls from collectors – but it could also allow for such harassment, lawyers warn.

The new rule limits collectors to no more than seven calls per week per account. It prohibits calls within seven days of a conversation with a consumer. But consumers may have multiple accounts in collections, resulting in a deluge of calls.

The one-touch-a-day doesn’t cover text, email, or social media, so consumers can be inundated with messages. The new rules also allow “limited content messages”, which could mean a proliferation of voicemail messages that don’t count as “communications”.

“We are concerned about what this will mean, especially for consumers who may, for example, have multiple medical debts in collection,” says Kuehnhoff.

What you can do: If you feel you are being contacted too frequently, you can ask the Collector to stop communicating in all but a few cases, such as when legal action is threatened. This goes so far as to prohibit communication in different channels.

No coverage from original creditors

The kicker with the FDCPA is that it only regulates third-party debt collectors, that is, a debt collector who does not represent the original creditor. A collector who works directly for an original creditor is not held to these standards.

What you can do: Work to quickly resolve an account when contacted by a debt collector, no matter who they represent. You may be able to work out a payment plan or settle for less than the amount originally due.

Rights violated? Submit a complaint

If your rights have been violated by a debt collector, file a complaint with the FTC.

Federal Trade Commission attorney Dan Dwyer said consumers should provide as much identifying information about the collector as possible.

“Then just tell us what the problem is as clearly as you can,” he says.

This article was written by NerdWallet and was originally published by The Associated Press.

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