Kathryn Haralson had already fielded calls from debt collectors at her home and work. They even phoned her daughter at college.
So when Haralson, 47, logged into her Facebook account one day, she was surprised by an unwelcome inbox message: a request to call "Mr. Rice" about her debt.
"It's not like they needed to go on Facebook to find me," Haralson said. "I was in contact with them all the time. That crossed the line."
Federal regulators could wind up agreeing with Haralson as the Consumer Financial Protection Bureau and Federal Trade Commission weigh new restrictions on how debt collectors may use social media websites like those run by Facebook Inc. and Twitter Inc. to contact potential debtors.
The rule is one of a series of actions contemplated by U.S. regulators in 2013 as they impose comprehensive federal oversight for the first time over the debt collection industry, which generated 180,000 consumer complaints to the FTC in 2011. In the 2010 Dodd-Frank Act, the CFPB gained new powers over debt collectors that no other federal agency ever had.
Richard Cordray, the CFPB director, has made debt collection a priority for the agency because about 30 million consumers — "nearly one out of every 10 Americans" — have accounts in collection totaling $1,500 on average, he said in an Oct. 24 speech.
"We will be using both our supervision authority and our enforcement authority to oversee the market and go after bad actors who flout the law," Cordray said.
Regulations would affect credit card issuers like Capital One Financial Corp. and JPMorgan Chase & Co., who also face supervision over how they handle debtors. The CFPB sent a signal of its intent in October when it announced a $112.5 million settlement with American Express Co. partly over claims of improper debt collection practices.
At the same time, debt buyers like Portfolio Recovery Associates Inc., Encore Capital Group Inc. and Asta Funding Inc. are also facing the first-ever federal oversight of their business. The CFPB approved a rule on supervision that took effect Jan. 2.
"As a company that engages in debt collection, we need to be prepared for the heavy oversight that CFPB will bring," Asta wrote in a Jan. 18 regulatory filing.
The accounts-receivable industry had revenues of $17 billion in 2011, according to Kaulkin Ginsberg, a Rockville, Maryland-based consulting firm. In addition to debt collectors, the industry includes debt buyers, who purchase written-off debt from creditors such as credit-card issuers. Debt collectors can be independent agents, employees of buyers or members of law firms.
Mark Schiffman, a spokesman for ACA International, a debt collection trade association, said the group has discouraged the use of social media by its members because the law is unclear, and court cases have not clarified how Facebook, Twitter and other sites can be used legally.
"We tell them to avoid" social media, Schiffman said in an interview. "The rules on it are not clear."
A body of U.S. bank regulators, the Federal Financial Institutions Examination Council, on Jan. 22 asked for public comment about proposed supervisory guidance to banks on social media. Debt collectors use of these media "may violate the restrictions on contacting consumers imposed by" current law.
The request said a broad swath of social media could be affected by the guidance, including Google Inc.'s Google Plus, Twitter's micro-blogging site, Yelp Inc.'s business review site and LinkedIn Corp.'s professional network. It could also cover Second Life, a site owned by closely held Linden Research Inc. where users create virtual identities and communities, and online games created by Zynga Inc., according to the request.
