A federal plan that would allow debt collectors to send unlimited texts or emails to borrowers until consumers opt out — but would limit how often collectors can call them — was condemned by consumer groups on Wednesday during an event in Philadelphia, while those in the collection business tepidly praised the proposal.
The mixed reaction came a day after the Consumer Financial Protection Bureau unveiled the highly anticipated plan to revise decades-old rules on debt collectors. Debt collection drew roughly 81,500 complaints to the bureau in 2018, making it one of the top sources of consumer complaints related to financial products and services.
If approved, the proposal would generally limit the number of times a debt collector could try to call someone to seven times a week. After speaking to a consumer, a debt collector would have to wait at least a week to call again.
There is currently no limit on the number of debt collection calls, though collectors are barred from calling before 8 a.m. and after 9 p.m. A collector calling too frequently could be considered illegal harassment under existing law.
The draft rules would allow companies to send electronic communications, such as text messages or emails, though consumers could opt out at any time. Unlike with phone calls, the bureau did not propose a specific cap on how many times a debt collector can email or text a consumer.
The CFPB brought the plan to Philadelphia on Wednesday for a panel discussion at the University of Pennsylvania’s Houston Hall, where consumer groups said the draft regulations would fail to rein in predatory practices. The proposed rules come as those consumer advocates accuse the Trump-controlled bureau of taking actions that benefit industry.
On Wednesday, debt collectors largely welcomed the proposal, saying it would bring clarity to what is permitted and prohibited.
Michael Froehlich, a consumer rights lawyer for Community Legal Services in Philadelphia, called the draft rules a “huge missed opportunity to really address some of the predatory and unlawful actions that our clients face every day.”
In particular, Froehlich noted the seven-call limit would apply to a specific debt, so consumers with several debts in collection could still be inundated with phone calls. As an example, he said a client had racked up $120,000 in student loan debt through eight different accounts.
“Under this proposed rule, debt collectors can call her 56 times per week,” he said. “If you don’t have the money, you don’t have the money. For her, the 10th call is not going to change that, and the 20th call is not going to change that."
Consumer groups had wanted a three-call weekly limit, while debt collectors were unhappy with the potential seven-call cap, calling it “arbitrary.”
“There isn’t any empirical evidence that the number is the right number or even an accurate number,” said Mark Neeb, chief executive of ACA International, a trade group representing collection agencies, creditors, debt buyers, and lawyers. “Our concern there is that not all debt is the same. [There are] different types of debt, different ages of debt, different stages of it being worked. So there is not a one-size-fits-all for debt collection.”
Still, Neeb was happy the proposal would explicitly permit collectors to contact consumers electronically, a somewhat gray area currently.
“When it comes to electronic communication, debt collectors are afraid of overstepping bounds because they didn’t know what those bounds were,” he said.
While the draft regulations set no limit on how many texts or emails a collector can send, a bureau spokesperson said it could be considered harassment under current rules if a collector sent too many messages.
The proposed rule would prohibit debt collectors from contacting a consumer at a work email address unless given prior consent by the borrower. In addition, the proposed rule would update the disclosures that debt collectors must send consumers and would prohibit a debt collector from suing or threatening to sue a consumer to collect time-barred debt if the collector knows or should know that the statute of limitations has expired.
The bureau’s proposal seeks to update regulations implementing the Fair Debt Collection Practices Act, a 1977 law passed long before millions of Americans carried cell phones, said CFPB Director Kathy Kraninger, who addressed the crowd before the panel discussion.
“The law was written at the time of telegrams, not emails. Landlines, not cell phones. And postcards, not texting,” Kraninger said. “Our proposed rules are designed to provide clarity where it was been lacking so consumers know their rights and collectors know their limitations.”