Banks to be Affected by CFPB Plan

Banks to be Affected by CFPB Plan

The Consumer Financial Protection Bureau (CFPB) recently proposed a new regulatory scheme that may have an upmarket effect on banks who use third-party debt collectors. While the proposed regulations would not directly affect first-party debt collectors like banks, the more onerous debt documentation requirements placed on collection agencies may have the result of increasing the costs incurred by banks when providing debt documentation to third-party collectors.

Protecting Consumers from Unsubstantiated Claims of Indebtedness

According to an outline of the proposed changes published by the CFCB, there are two main problems  causing debt collectors to collect the debt from the wrong person or the wrong amount of debt: first, third-party debt collectors receiving insufficient and inaccurate information regarding debts: second, consumers are not receiving information in initial notices critical to the determination of whether the debt is theirs. The agency is considering three interventions to address these issues, which are as follows:

  • Imposing a requirement that debt collectors substantiate claims that a certain consumer owes the debt it is attempting to collect. This requirement would be combined with more specific actions that collectors could take to substantiate their claim that a particular consumer owed a particular debt.
  • Imposing a requirement that certain information that the consumer provides during the course of collections be passed on to collectors who were attempting to collect that debt in the future.
  • Providing a better Fair Debt Collection Practices Act (FDCPA) validation notice and a Statement of Rights that would provide consumers with information that would allow then to determine whether they owed the debt that the collector is attempting to collect and also to navigate the debt collection process more generally.

Additional proposed regulations touch on other issues related to third-party debt collection practices, including the types of entities covered by the FDCPA and the frequency with which debt collectors can contact consumers. Whether these proposals become regulations remains to be seen, but the agency has not yet requested public comment or released a timeline for publishing the proposed rule, which likely means that action is not imminent.

Call 800-223-6259 today for more information.

Since 1984, CMCS has helped businesses in all industries with their debt recovery efforts. When you work with us, there are no upfront fees and we will only charge fees if we recover on your claim. We are committed to fair, ethical, and legal debt collection methods that preserve your business’s image while maximizing collection on bad debt. To learn more about how we can help you, call us today at 800-223-6259.