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What New Debt Collector Rules Mean for You
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What do the new rules for debt collection Have to Do with You
By Sean Pyles Senior Writer | Personal financial, credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet’s “Smart Money” podcast. On “Smart Money,” Sean talks with Nerds from NerdWallet’s NerdWallet Content team to answer questions from listeners regarding their personal finances. With a particular focus on sensible and actionable money advice, Sean provides real-world guidance that will help people improve the financial situation of their lives. In addition to answering listeners’ financial concerns on “Smart Money” Sean also interviews guests who are not part of NerdWallet and creates special segments that explore subjects such as the racial wealth gap, how to start investing and the history of college loans.
Before Sean was the host of podcasts at NerdWallet He also covered issues related to consumer debt. His work has appeared in USA Today, The New York Times as well as other publications. When Sean isn’t writing about personal finance, Sean can be found digging around his garden, going for runs , and taking his dog for long walks. He is based in Ocean Shores, Washington.
Nov 30, 2021
Written by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years at The Oregonian in Portland in positions such as copy desk chief and team director of design and editing. Her previous experience includes news and copy editing for many Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications at The University of Iowa.
A majority of the products we feature are provided by our partners who pay us. This influences which products we write about and where and how the product is featured on the page. However, this does not affect our opinions. Our opinions are entirely our own. Here’s a list and .
The process of dealing with third-party debt collection agencies can be a bit confusing and frightening. for the more than 68 millions U.S. adults with debt in collections, knowing their rights under the law is essential.
The Fair Debt Collection Practices Act is applicable to third-party debt collectorspeople who purchase the delinquent debt from an original creditor, like a credit card company. A revision to the rules governing how the act is applied which took effect in the latter half of 2021 changes the conditions of engagement.
Certain changes make the law more modern and clear the way it’s implemented. However, consumer advocates argue that other changes don’t go enough or could result in unintended consequences.
Know your rights
The FDCPA provides a variety of services , including:
Limits on debt collector actions
Collectors must be truthful, including about details of the amount owed. They are not allowed to employ abusive language, make calls repeatedly in a harassing manner or use threats of violence.
Collectors cannot request an unpost-dated check with purposes of threatening or instituting criminal prosecution. They can’t also collect more than the amount owed or threaten to take property if they aren’t allowed to do so.
Consumers who are owed debt must receive an “debt confirmation letter” outlining important details such as the amount due as well as the name of the collection company and the way consumers can dispute the debt.
People can limit how and when a collector contacts them by telling them to not contact them at all. In all other cases, the collector must honor that request.
If consumers are unsure about the specifics of a debt, they can send the collector a debt verification letter seeking more information beyond the validation letter.
Updates to the FDCPA rules
Here are some of the changesthat went into effect in late 2021:
New options for communication
Debt collectors have the ability to contact consumers by messages via text, email, and social media posts without prior permission from the consumer to use these channels. The messages must explain how the consumer may limit the contact through these methods or ask for no contact.
The CFPB also regulates how debt collectors can make use of these channels. A debt collector cannot communicate with a consumer through social media if other consumers have access to the message, like a public comment in or on an Instagram post. Collectors must also disclose to the consumer that they are a debt collector prior to sending an invitation to a friend. Additionally, the FDCPA’s limitations on communication with a consumer at inconvenient times or places is also extended to electronic channels like social media.
Consumer advocates are concerned that debt collectors could send important details like the letter of debt validation to social media or email accounts that aren’t being used.
“What consumers need to know is that it’s going to be really crucial for them to be proactive to choose not to receive communications in the event that they do not want to receive communications through text message or emails,” says April Kuehnhoff who is a staff attorney for the National Consumer Law Center.
She also notes, “If consumers start getting communications from a debt collector and you haven’t gotten the initial notice about the debt, they must ask for that information.”
New limitations on the actions of collectors and disclosures
In late 2021, the new rules issued by the CFPB concerning the way debt collectors are able to disclose details about a debt as well as the time they can put the debt on a person’s credit report became effective. There are also new limits regarding actions pertaining to “time-barred loans,” which is for suing over the debt.
Specifically, when making initial contact regarding a debt, collectors must provide detailed disclosures about the debt, the rights of the consumer in relation to collection, and the way they will respond to the debt collector. This information must be disclosed before the collector reports the consumer’s debt to an agency that tracks credit.
For debt past the statute of limitations, it is the CFPB clarifies that debt collectors are prohibited from suing or threat to sue consumers to obtain payment on the debt. However, debt collectors can still solicit payment from consumers on the expired debt, a sketchy practice that can result in a consumer inadvertently revoking a ” ” and making themselves vulnerable to lawsuits.
What causes consumer advocates to be concerned, and what you can do
Some experts are concerned that the updates aren’t enough and say some of the changes may actually weaken consumer protections. Here are two main concerns:
Frequency of communication
The new update clarifies the definition of a “harassing” frequency of phone calls from collectors — but this could also allow for harassing, as advocates warn.
The new rules limit collectors to calling no over seven calls in a week per account. The rule prohibits calls within seven days of having an exchange with a consumer. But consumers may have multiple accounts with collections, leading to a barrage of calls.
The one contact per day does not include text, email or social media channels, meaning users could be bombarded with messages. New rules allow for “limited-content messages” which could result in an increase in voicemails that aren’t considered “communications.”
“We are concerned about what this might turn out to mean, particularly for consumers who might, for example with several medical debts that are in collections,” Kuehnhoff says.
What you can do: If you think that you are being bombarded with messages, you can demand the collector stop communication with respect to all but a handful of occasions, like when legal action is threatened. This also includes prohibiting communication through various channels.
No coverage of original creditors
The kicker with the FDCPA is that it regulates only third-party debt collectors – that is, a collection agency who doesn’t represent that creditor’s original. The collector who works directly for the original creditor isn’t held to these standards.
What you can do is to quickly resolve an account — no matter whom they represent. You may be able to come up with a payment plan or settle the account for less than what you originally owed.
Are your rights were violated? Do you have a right to complain?
If your rights have been breached or violated by the debt collection agency .
Dan Dwyer, staff attorney at the Federal Trade Commission, says consumers should give as much details about the collector as possible.
“Then please explain what the issue is as clear as it is possible to do,” he says.
The article is written by NerdWallet and first printed by The Associated Press.
About the author: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has been featured in The New York Times, USA Today and elsewhere.
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