Debt collectors, the aggressive agencies that track you relentlessly for money owed, are finally being policed. Thanks to the Dodd-Frank Financial Reform Act of 2010, a federal consumer watchdog group will supervise the activity of the nation’s largest debt collection agencies beginning January 2013.
The industry has come under attack by consumer protection groups for its aggressive tactics, like telling consumers they’ll be imprisoned if debts aren’t paid. Debt collectors, consumer advocates say, use their power to abuse consumers and treat them unfairly.
Here are a few of the new rules for debt collectors as required by the financial reforms:
-Properly identify themselves to consumers.
-Properly disclose debt information and the correct amount owed.
-Have a process to resolve disputes.
-Communicate “civilly and honestly” with consumers.
-Prohibition against using obscenity or profanity.
-Prohibition against any tactics, like repeated phone calls, intended to “annoy, abuse, or harass.”
The rules will apply to approximately 175 companies. These companies record at least $10 million in receipts each year and account for 63 percent of the industry’s $12.2 billion in annual collections. Because so many consumers – about 30 million Americans – are affected by this industry, the federal government wanted to provide protection for consumers and enforce fairness amongst debt collectors, said director of the consumer bureau Richard Cordray in a statement. “Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” Cordray said.
There are three types of debt collectors the consumer bureau will police:
1. Companies that buy up debts for pennies on the dollar and then keep whatever they can collect.
2. Companies that get a commission or fee to collect debts on behalf of others.
3. Lawyers who pursue debt collection through litigation.
The Dodd-Frank law gives the consumer bureau the power to regulate large companies involved with finances that aren’t banks. To be able to enforce that power, the bureau must establish a set of rules or codes for the debt collectors to follow. According to Bloomsberg Businessweek, debt collectors have come under scrutiny of late because of the aggressive tactics they use to track debt accrued from the financial mayhem of the Great Recession. During the Great Recession, many consumers fell behind in payments for student loans, medical bills, and credit cards.
What to Do If a Debt Collector Contacts You
The Federal Trade Commission offers much helpful advice for consumers who are dealing with a debt collector, lawyer, or other agency trying to collect debt. When a debt collector first contacts you about a debt owed, it may be worthwhile to speak with them at least once to see if you can resolve the matter. In some cases, the debt collector may have contacted you by mistake or you may not owe the debt at all. If you don’t want the debt collector to talk to you again, send a letter in writing, make a copy, and get a return receipt for your records. The debt collector won’t contact you again, but they may sue to collect the debt.
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