Regulators ready to bring abusive debt collectors to heel

Debt collectors are in for a rude surprise. The government is cracking down on how they contact debtors.

The typical debt collection agency today succeeds by being obnoxious: calling every day, making vague warning of the consequences of nonpayment, handing debts off to other agencies to collect.

This matters to a lot of people. About 77 million people are being hounded for debt payment today. These changes will affect all these people.

A number of practices will be sharply limited under proposed plans by the Financial Protection Bureau:

  • Collectors must collect the right debt. This means they have to ensure they are calling the right person at the right address or phone number.
  • Cut back on the number of contacts. Collectors may be limited to six efforts to communicate per week.
  • Being clear about details. Collectors would have to state if a debt was too old to take you to court for it.
  • Document the debt for disputes. Collectors would have to acknowledge when a dispute is filed, and back off until the dispute is resolved.
  • No more document-free collection efforts. Collectors must bring appropriate documentation of any debt.
  • No more "dispute burying." When a debt is handed over to a new collection agency, existing disputes must be resolved before going further.

This is the first time in four decades that the government is making it harder to collect debts. Most efforts over this strretch of time have tended to strengthen the collector's hand.

Oddly, according to a New York Times report, the collections industry has been quiet about these proposed changes. It will mean an end to harassing collection practices that have given the industry a black eye, and caused pain to millions of debtors.

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