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CFPB vs. Debt Collectors

The Consumer Finance Protection Bureau (CFPB) recently issued several try-at-home remedies to aid in the struggle against unruly debt collection firms. In a blog post, they introduced:

  • Two bulletins reviewing the Fair Debt Collection Practices Act, and the protections it affords against collectors
  • Five "action letters" upholding these protections, designed for consumers to send collectors
  • A new process through which consumers may lodge complaints against collectors who step out of line

At an accompanying fielding hearing in Maine, CFPB Director Richard Cordray encouraged collection firms who treat debtors fairly and legally to “go on about their business.” However:

those using illegal means to collect consumer debts should be forewarned that we will not tolerate such behavior. . . . We will use our supervisory and enforcement authorities to identify and eliminate illegal practices while simultaneously empowering consumers to stand up more effectively for their rights under the law.

Before CFPB’s formation, the Federal Trade Commission (FTC) was the main government agency keeping a watch on a fast growing debt collection industry. The commission has published several sharp reports on these firms and repeatedly sued law-flouting collectors. They nipped Texas Global Solutions with a $3.2 million fine for consumer harassment this week.

A working person struggling with debt may take some pleasure in seeing the FTC fine a big collector like Texas Global. But overall, the FTC just hasn't done enough to help people in desperate situations -- people, who among other things, are harassed by psychologically abusive phone calls. 

Low-income people are often those "preyed on by lenders who charge outrageous interest and structure loans to be debt-traps,” as ex-FTC official David Vladeck pointed out. These people have the fewest alternatives when deciding how to absorb unexpected expenses like medical bills or lay-offs, and legal help is often out of financial reach.

For these reasons, the suggestion to “consult your attorney” often becomes an ugly paradox. CFPB’s recent approach is a bit worldlier in some regards: “Here are tools that’ll help right now even if you’re on your own.”