The federal bureau charged with protecting U.S. consumers’ finances was poised to lay out plans on Thursday for toughening regulation of debt collection, as complaints have mounted about the multibillion-dollar industry.
The Consumer Financial Protection Bureau’s proposal would come on top of an existing federal law, the Fair Debt Collection Practices Act, that prohibits collectors from using abusive, unfair or deceptive practices to recoup money.
The proposal, expected to be unveiled at a field hearing in California, will likely address the thousands of complaints on debt collection CFPB receives each month, more than those filed about any other area. They mostly raise issues with companies pushing people to pay debts that do not exist.
Consumers also complain about “communication tactics,” collectors taking or threatening illegal actions, lying, and not receiving enough information to check if they really do owe money.
The agency has been working on its proposal for roughly three years.
“We want to ensure that all players in the industry are working with correct information, that consumers are fully informed, and that consumers are treated fairly and with dignity,” said CFPB Director Richard Cordray while announcing it was drafting new regulations in November 2013.
At the time, the bureau said it was concerned about some debt collectors making false threats of lawsuits, criminal prosecution, wage garnishment, property seizure, and more. It also said it wanted to ensure debt collectors were contacting the appropriate debtor, about the correct amount owed, and using accurate paperwork.
The trade group ACA International has warned its members the proposal could be the biggest change to the credit and collection industry since that law was passed. Annually, debt collectors recover $55.2 billion across the country, and receive commissions totaling $10.4 billion, according to the group.