U.S. Senator Sherrod Brown (D-Ohio) is pushing Consumer Financial Protection Bureau director Richard Cordray to tighten oversight of the collection industry, including possibly reforming the Fair Debt Collection Practices Act (FDCPA).
Brown sent a letter to Cordray stating that debt collectors outsized influence on consumers ... financial health could prove exceedingly harmful without more federal oversight. He pressed Cordray to force collectors to have original evidence that a debt is owed, such as a signed contract; ban the sale of debts without such documentation; and prohibit collectors from pursuing old, time-barred debts.
Were just hearing more and more of these stories [of rogue collection agencies], Brown said. These agencies are pretty aggressive.
Brown wants the CFPB to use the authority given to it by the Dodd-Frank Wall Street Reform and Consumer Protection Act to help revise the FDCPA, which sets conduct standards for collections but hasn't undergone a significant update since it was established in 1977. It hasn't accounted for technological changes in the past 36 years.
Brown plans to hold hearings next month to discuses ways to refresh the law. Both critics of the collections business and collection industry insiders say the law is out of date and needs revised.
Brown's recommendations include:
Require that information on previous collection attempts go with the debt.
Require debt collectors, whether primary creditors or third party collectors, to hold all relevant documentation before issuing their first debt collection notice.
Prohibit the sale of unverifiable debts.
Eliminate the sale or collection of time-barred debt.
Issue updated guidance for consumer dispute procedures reflecting the new technological possibilities for documented consumer disputes.
Brown is a member of the Senate Finance Committee and the Committee on Banking, Housing and Urban Affairs. He also is Chair of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection.
Last year, nearly 15% of U.S. adults had a debt in collection. The FTC logged more than 125,000 complaints about collection practices in 2012. About 40% of those related to either a debt the consumer didnt owe or one that had been illegally inflated. Nearly a third of the complainants said they were threatened with jail, job loss, ruined credit and homelessness if they didnt pay up.