How changes in debt collection laws affect consumers

By: on 2017-05-30
Ask Phil Bradford

The changes in debt collection laws have something in store for debtors (consumers).

Have a look below and get a clear idea of your rights.

Changes in debt collection laws

On Thursday 28th July 2016, the Consumer Financial Protection Bureau (CFPB) has proposed regulations to debt collection practices. The changes are as follows:

  • Debt collectors must provide full documentation of the debt before collecting.
  • Limitations regarding the number of time a debt collector may contact a debtor.
  • Debt collectors must provide information to a consumer regarding consumer's rights.
  • Rules for calling debtors regarding old debts.

Now, let's’ learn about the proposed changes in details:

1 Provide full documentation of the debt before collecting

Debt collectors have to prove that the debt they’re trying to collect belongs to the individual they’re collecting the debt from. In short, they’ve to provide full documentation of the debt they’re collecting.

This would help debt collectors from contacting the wrong person due to lack of correct information. Also, it would keep a check on debt collectors who contact the wrong person knowingly.

The debt collector has to verify the documentations (like name of the debtor, the amount owed, account number, and last-known address and telephone number, and so on) of the debtor before contacting him/her.

2 Controlling the debt collection call

Under the prevailing debt collection laws, debt collectors can call, text, and email the debtor N number of times. But, the newly proposed debt collection laws restrict the number of times debt collectors can contact debtor.

According to the proposed regulation, third-party debt collectors can contact the debtor 6 times per week. And, once they reach the debtor, they can contact him/her 3 times in total. These include phone calls, text messages, and emails.

3 Can’t sue debtor after the debt has crossed the Statute of Limitations period

Under new debt collection rules, debt collectors are prohibited from suing the debtor for the debt that has crossed the Statute of Limitations (SOL) period. Moreover, debt collectors have to reveal whether or not they’re contacting about an old debt on which the SOL has expired.

If the SOL on the debt has expired, debt collectors have to notify the debtor about it and also inform the debtor that he/she cannot be sued for it.

Since the debt collector cannot sue the debtor in court, don’t think that the debt is discharged or settled.

4 Provide information to consumer regarding consumer’s rights

When debt collectors contact debtors (consumers), they’ve to give full information regarding consumer’s rights to them. So that, consumers don’t fall prey to the abusive debt collection practices.

Debt collectors should provide this information in writing and in clear English.

Effects of debt collection laws

Now that you know the proposed changes in the debt collection laws, let’s find out how these affect debtors:

1 Avoiding legal hassles due to improper documentation

When your debt is sold multiple times, debt buyers lower on the collection chain doesn’t have full documentation of the debt.

This law prohibits debt collectors from collecting the debt if it lacks proper documentation. So, consumers have to provide full information of the debt if contacted by subsequent debt buyers.

2 Original records of the consumer will be focused

A debtor’s original documents (like payment and billing information, and contracts and leases, and so on) will be under the spotlight of many legislative bodies. So, consumers must retain all information for at least 7 years.

3 Limitation on excessive or needless communication

Consumers will be saved from answering endless collection calls since it has been reduced to 6 calls per week. Thus, debtors will get with a breathing space.

Moreover, if debtors want to stop the ways debt collectors are contacting them (like contacting them at work), they can do that. If a consumer expires, debt collectors can’t contact his/her family members like surviving spouse for sometime, which is known as the 30-day waiting period.

4 Making disputes easy

Debtors will be saved from being sued by debt collectors if the SOL on debt has expired. However, collectors should send all the details of the debt to the consumer in the initial collection notices. They should also provide proper information about consumer’s federal rights to the debtor.

5 Collection of correct debt

The changes in the debt collection laws would help debt collectors collect the correct debt. They need to provide and verify every details of the debt before contacting the debtor. It would also prohibit collectors from collecting the wrong debt knowingly.

Consumers should stay true to their debts and provide details of their debts to collectors. This would help them tackle legal hassles with ease. If disturbed by debt collectors, consumers must contact CFPB for help.

Last Updated on: Tue, 30 May 2017

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