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Three potential changes to debt collection practice regulations

Harassing calls from debt collection agencies are not uncommon. Unfortunately, a large number of people experience these calls for debt that they don't even owe. According to the Consumer Financial Protection Bureau, 40 percent of all reported complaints about debt collection practices are the result of attempts to collect on debt that the consumer does not even owe.

Is harassment by debt collection agencies legal? In short, the answer is generally no. Although debt collection agencies are allowed to contact creditors for payment, regulations are present that outline what kind of contact is allowed. One purpose of the Consumer Financial Protection Bureau is to help protect consumers from companies that violate these regulations.

Part of these efforts is highlighted in a recent proposal to update current regulations. Three key changes include:

  • Documentation. The proposed regulations include a call for increased documentation of the debt the collection agencies are attempting to collect. This is intended to reduce the practice of what is referred to as "sewer service". Sewer service occurs when collection companies fail to properly notify alleged debtors of a lawsuit for collection. Instead of serving the consumer with the notification as required by law, the paperwork is thrown away. If the consumer does not respond to the lawsuit summons, a judgment may be issued against the consumer. This is a problem because the judgment can often be used to extend the time period the collection agency has to collect the debt.
  • Recourse. The changes would also require debt collection agencies to clearly state that consumers can dispute the debt.
  • Reiteration. The proposal would also better ensure that debt collection agencies follow current regulations, specifically those that limit the amount of time a business has to collect on an old debt. State statutes of limitations often limit this, not allowing collection of debt after a certain period of time has passed.

Just how big of a deal is this? According to a recent report by The New York Times, federal regulators have not considered strengthening these rules in over 40 years.

What's a consumer to do? Consumers have rights. Legal recourse is available to those who are the victims of harassment by creditors. This can include filing for protection through bankruptcy or enforcing rights violated by credit collection agencies through a lawsuit.

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