Debt Collectors May Face New Rules

Article excerpt

WASHINGTON -- If you owe a debt, you should make every effort to pay it. After all, you've enjoyed the services or goods that your debt bought. And companies have a right to try to collect or even sell that debt to recoup their money. The more they can collect, the less likely they are to pass on their debt troubles to other consumers in the form of higher prices or the cost of credit.

But consumers have a right to accurate documentation to back up the collection efforts. And certainly folks who don't owe a debt shouldn't be harassed or bullied because of some computer error or faulty debt data.

And this is where the Consumer Financial Protection Bureau comes in. The watchdog agency is considering rules for the debt collection market, but before it writes any new regulations or strengthens those already on the books, the agency wants the public to weigh in on an array of issues involved in debt collection.

Among the agency's chief concerns is making sure debt collectors have the correct person, debt and documentation.

"It is widely recognized that problems with the flow of information in the debt collection system are a significant consumer protection concern," the agency said in its advance notice of proposed rule-making.

Often when debt is sold to collectors for pennies on the dollar, the sale doesn't include a lot of information about the debtor or his or her debt. The documentation might include nothing more than the person's name, last known address, Social Security number and debt amount. Several states have implemented new laws, court rules or administrative orders requiring more specific proof of debt from companies who sue consumers to collect on outstanding debts.

Even ACA International, a trade group for the consumer debt collection industry, believes some updating is in order.

"Current federal debt collection laws are woefully outdated when it comes to areas such as communication, documentation, verification and statutes of limitations," ACA said in a statement. "We agree that modernizing the nation's consumer debt collection system is important so long as changes are based on common-sense solutions that preserve balance between consumer protection and the ability of a creditor or debt collector to lawfully recover debts."

Collectors have a limited number of years in which they can sue someone for payment. …