During a field hearing in Maine on Wednesday, CFPB Director Richard Cordray spoke on the recent issuance of two bulletins intended to warn companies about practices that will receive extra attention from the watchdog.
“While we can put a number on debt, we cannot quantify the emotional toll that it takes on consumers to live under the shadow of indebtedness – especially if they are treated poorly by debt collectors,” Cordray said. “Such experiences are almost inevitably accompanied by mounting feelings of frustration and helplessness. While many debt collectors play by the rules, and treat consumers fairly and respectfully, others try to get ahead by flouting the rules. Our job is to root out bad actors and protect consumers against unfair, deceptive, or abusive practices and other legal violations, which damage both consumers and also every debt collector that tries to operate within the law.”
The agency issued a bulletin that identifies practices considered to be abusive or harmful to consumers, regardless of the type of entity that engages in them.
Only the practices of third-party debt collectors and debt buyers are subject to the Fair Debt Collection Practices Act. The bulletin makes clear that, while first-party collectors are not covered under the FDCPA, they will be subject to the same prohibition against deceitful, unfair or abusive practices under the Dodd-Frank Act.
“So today’s bulletin makes clear that we will be working to ensure that everyone collecting on consumer debts is following the law,” Cordray said. “This is consistent with our new responsibility to engage in evenhanded oversight of entire markets, regardless of whether or not individual participants are chartered institutions, like banks, or non-chartered institutions, like debt collectors and debt buyers. Illegal practices by anyone harm consumers, erode consumer confidence, and undermine fair competition by responsible providers in the financial marketplace. The law clearly recognizes that debt collectors can significantly hurt consumers in ways that go beyond pure dollars and cents. Much of the law was deliberately crafted to protect the dignity and privacy of the individual consumer and to ensure that he or she is treated with the respect we all deserve – even if we have fallen behind on one or more of our financial obligations.”
The second bulletin issued by the agency warned companies that they must be careful when making statements about how paying a debt will affect a consumer’s credit report, credit score or creditworthiness.
“Debt collectors know that the information in a credit report can have a powerful influence over a consumer’s further access to credit, and they may use this as leverage when talking to consumers,” Cordray said. “But some debts are too old, under federal law, to be included on a consumer’s credit report for most purposes. Collectors may try to conceal this fact, telling consumers that paying the debt would remove it from their credit report even though the debt does not show up there anyway. We have also seen other types of cases where debt collectors mislead consumers by telling them that paying a debt would improve their credit score or creditworthiness.”