Closed Rule

Consumer Debt Collection Practices (ANPRM)


The Consumer Financial Protection Bureau (CFPB) might propose new federal rules on how creditors and debt collectors can act to get consumers to pay overdue credit card, medical, student loan, auto or other loans. This decision matters to you if you

  • had an experience with debt collection (good or bad)
  • counsel consumers with overdue debts
  • have a business where you do your own account collection or
  • work in the debt collection industry

Here, you can learn what CFPB is thinking and what it needs to know. You can share information and experiences and discuss ideas with others. At the end of the discussion, CFPB will get a detailed summary and your input will help it decide what to do next. (This phase is for gathering information and brainstorming. The next phase would be where CFPB comes up with specific proposals and asks people to comment again before it decides whether to adopt those proposals as new regulations.)

Consumers and business both have a stake in effective, responsible debt collection practices. Don't be a bystander. Help CFPB make the right decisions about new consumer debt collection regulations. Share what you know and encourage family, friends and coworkers to do the same.

Discussion Telling consumers what's happening with their debts - 124

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1|Notice that the debt has been sold - 65

Agency Proposal

Many consumers don’t realize that the money they owe a merchant or some other creditor is an asset that might be sold to another company. And this company might then sell their debt to yet a third company, either by itself or as part of a large package of debts. Now, no one involved in the sale has to tell consumers when their debts are sold or resold. So, a consumer who has fallen behind in payments could be contacted by a debt collector working for a debt owner the consumer has never heard of. The consumer might be confused about where the debt is from and who he/she must pay.

CFPB wonders if there should be a new rule that consumers must be told when their debts are sold. (If the debt is a home mortgage, federal law already requires this. The notice must tell the consumer when to start sending payments to the new company and how to contact someone there.)

  • Current practice: Do sellers or buyers of debts typically tell consumers when their debt is sold? If so, what information do consumers get and how do they get it?
  • Benefits: How would getting notice help consumers? (Be as specific as possible).
  • Costs: What expense or problems would debt sellers or buyers have with giving notice? Would these be different for different kinds of debt (credit card, automobile, medical, etc.) or different kinds of debt buyers or sellers? (Be as specific as possible).
  • New rule: What information should be in such a notice? Should the notice have to be sent by the seller, or the buyer of the debt?
Read what CFPB said in the ANPRM about Information Debt Owner, Debt Buyer, or Third-Party Collector Provides to Consumer Upon Sale or Placement of Debt.


Commenting is now closed.

Assignments without notice could lead to consumers paying the wrong person. The CFPB should encourage proper notice by ruling that a payment made to either of the assignee or the assignor reduces the debt.

Maybe I missed something but I never received any notice from my original mortgage lender that my mortgage was sold. Maybe that is better since the new "owner" may be a pool of investors.

As to notification my experience was the buyer sent the notice listing the original creditor name. Requiring the seller and buyer to send a notice would cause consumer confusion.

Thanks for sharing your experience, RBell, and welcome. What do you think of josephusmyer's comment above? Could a lack of notice lead to consumers paying the wrong person?

If the present mortgage repayment debacle is any indication of noticing or added noticing I think it is much simpler to notify the consumer whom to pay and list the original creditor name. Also, I think it would be a good idea for CFPB and the industry to combine this with FCRA issues. For example, if a consumer today reviews their credit reports the normal term is "sold to another lender" but no name. I have heard similar stories from attorneys who try to match what a consumer lists as a creditor versus what is listed in a credit report. Seems to me that everyone is trying to close the back door but leaving the front door open.

Yes, but also that upon transfer, any failure to previously verify debt per consumer request goes with the debt sold.

Welcome to RegulationRoom, rb. You can tell us more about what types of information should be transferred between sellers and buyers of debt here.

find the most egregious and cavalier user of collection agencies is the "medical professional". To wit: I received a collection agency call for a small amount due on a pathology test taken at Cedars Sinai Hospital in Los Angeles. We had moved and all notices were sent back to Cedars. No one else and there were dozens, had this problem. The amount due was the amount Medicare did not pay. I have a supplement with a large deductible. To my knowledge it was never billed. Anyway, I was forced to deal with this obnoxious credit agency which threatened to ruin my credit which is almost an 800 FICO score. Calls to the collection agency and Cedars solved the problem but not without creating anxiety and aggravation for me. A person from the collection agency working at Cedars apologized. It took 3 or 4 letters to get the Administrator, Mr. Prisilac, to respond. His response implies that Cedars had no responsibility in this matter. For him it was all the collection agencies problem. That is not true. Cedars hires these people and like all professionals in my experience has no further responsibility. The entire responsibility, in my view, lies with Cedars etc. There is little downside for them. Their lack of interest in their patients and complete interest in collecting dollars whether due them or not is mind boggling. Unless we deal with the base of the problem, the doctors and hospitals, who are too dignified to deal with money, but will take 50% from a distance even if it is not due, this problem will persist and the public will continue to be subjected to the riffraff that is most collection agencies. These people are worse than indifferent. They attack and steal from the most vulnerable of people; the sick and poor.

Welcome to RegulationRoom, alf1052, and thank you for your comment. It sounds like you had a bad experience with Cedars Sinai. Depending on what the collector said to you about ruining your credit score, it may be the kind of statement CFPB is trying to regulate. Please see the topic page, Unlawful collection practices, Substantiating claims about the debt and the effects of payment on credit, to learn more and comment.

Response to Alf -- and I wish I knew how to link these -- I agree the medical profession has the worse abuses because they have the money to hire a full time agency. Yes they make mistakes. I just wrote up how one eye doc got me confused with another person with the same name.
The crux of this, I think, is make them be responsible. They do always want to blame someone else. It's the credit reporting agency. Not it's the doctor's office. It's this or that. That roulette wheel needs to stop, and if not, create sanctions that hit them in the pocket book. And the onus should NOT be on the consumer. How to do that is a matter of drafting up details, but it can be done. When you start to hold people responsible for their actions, then they suddenly stop making mistakes.

I recently helped out a friend whose Los Angeles business certificate/tax debt was turned over to Alliance One only after 4 years (!) of delinquency, and with no correspondence or notices whatsoever being sent to him prior or during the collection. He found out about its existence when he pulled his Trans Union credit report. Turns out, the city of Los Angeles had a wrong address for him, and never once during the 4 years bothered to check with DMV or otherwise what the correct address was; they just sent it to a collection agency after 4 years. I think creditors and government entities alike should be required to first verify the correct current address of the debtor and send the debtor a letter, certified mail return receipt requested, before they go ahead and just turn it over to collectors. Please help draft legislation to that effect!!!

Welcome to RegulationRoom, dkossenk, and thank you for sharing your friend’s experience and your suggestions for verifying the debt. At this stage, CFPB is looking for information on problems consumers and responsible debt collectors are having. As CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what commenters, like you, say here. Please see When consumers dispute a debt to talk more about how collectors should investigate and verify a debt.

From a collection standpoint, I can tell you that many creditors would LOVE to check with the DMV to get current address information. Unfortunately, many privacy laws make that impossible. It's also extremely common for people to fail to update their addresses either with their creditors or with the post office. Any legitimate collector wants to find the right person.

The problem is that this often leads to duplicate reports on credit files and each time the debt is sold the date is updated so it looks like a new collection is on the credit report and this impacts the FICO.
ATT has me owing a fee for terminating my cellular contract early (due to problems with their poor service). This $300 fee has been sold so many times (I have never been notified) but it appears several times on my credit report and has been made to look like a recent debt when it is from 2008.

Hi jfearon, thank you for joining the discussion. Would it have been helpful for you if you were notified each time the $300 debt you mentioned was sold? Was there information you didn’t get that would have helped you deal with the problem?

Yes, it would be helpful to be informed instead of later seeing the multiple collections on my credit report.

Off topic comment: Would like to see regulators approve email as a method of delivery for notifications. Most people keep their email even when they change physical addresses. Harder on the post office but probably much more effective, with no-cost proof of attempted contact.

Thank you for your suggestion, Carowis. CFPB is actually asking a number of questions about whether collectors should contact consumers through email and what the privacy concerns could be. You can read more about CFPB’s ideas and comment on them here.

Consumers should be made aware of sale or transfer of their debts. From whom to whom along with effective dates and contact info for the creditor and the new owner of the debt.

Notifying consumers of the sale of their debts and related details would help consumers with identifying who is contacting them about a debt; there are robo calls about lowering your credit card interest rate and such that are solicitations. Consumers have a right to know who they are dealing with in relation to their financial affairs.

A notice should go out that the debt has been sold because it definitely informs the consumer in how they should go about negotiating repayment of the debt.

When the debt is sold, it is sold for significantly less than what is owed, and the lender gets to write it off, and the borrower takes a 7-year negative hit in their credit profile.

Sometimes when you are dealing with debt collectors, the "debt collector" is often a wholly-owned subsidiary of the "original" lender, which means they get a tax write-off; you get a hit in your credit; and they still try to collect on the entire amount.

If a debt is sold, then it should actually be sold to a third-party, and not a subsidiary of the original lender. And consumers should get full disclosure on who their debt has been "sold" to.

Just like mortgage servicers are required to send "goodbye letters" (a notification of when loan has been sold) and "hello letters" (a notification of when another company is buying a debt), so also should debt collectors. Also, they should be required to disclose the amount for which they bought the debt... the discounted price. Also, there needs to be full disclosure as to who is buying the debt along with the disclosure of the owners of the debt collection company and the street address of the company so face-to-face meetings can be arranged. Full transparency and full disclosure should be required related to any company trying to collect debt.

When mortgage holders transfer servicing of a mortgage loan to another creditor, they have rules in place as to informing the consumer that their loan has been sold. Apply the same standards to any debt. Period.

Hi, jweb1510. Can you tell us which mortgage standards or rules would be most helpful to consumers? Should the kinds of information in the notices vary based on the kind of debt (medical, credit cards, etc.)?

Very confusing if I can pay my student loans directly to DOE or to one of the many private companies who have owned my loan over the years. They continue to try to entice me to restructure the student loan debt - very misleading - without disclosure of their fees - at this point I cannot even trace a $30000 fee that was double billed to my total. It is a web of confusion that I cannot escape. I intend to take my student loans to my death as I have no other way of making the monthly payments.

Welcome to RegulationRoom and thank you for your comment, Johnston. CFPB provides help for consumers with student loans on their website, including a Repay Student Debt tool. Could you tell us more about your experience? Was your student debt sold to another company or did your restructure with your current creditor?

I was never informed by Bank of America that they sold my credit card and closed the card. When I realized it, I paid it off immediately. During that quarter, after long illnesses, my Father and Mother both passed (within 31 days of each other) and frankly, credit card payments were not in the forefront of my thinking. ALSO, just because a bank or credit card company has been exempted from Usury laws does not mean they do not commit the violation! THAT needs to be stopped!

Welcome to RegulationRoom, anthonysd. Under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), CFPB can review the consumer protections in the credit card market. You can learn more on their website Know before you owe: credit cards, which also allows you to file a credit card complaint. For our discussion, CFPB is looking for information on problems consumers and responsible debt collectors are having. Did Bank of America sell your credit card to a debt collector? If so, please take a look at the topic page, The “validation notice” sent to consumers, and let us know what information you would want to have received when your card was sold.

Quote: "just because a bank or credit card company has been exempted from Usury laws does not mean they do not commit the violation!" Actually, that's exactly what it means. You can't violate a law that doesn't apply to you. If you don't like the interest rates that credit card companies charge, don't use them.

If a consumer is notified that their debt has been sold, there should be a way to contact the original creditor to verify. (i.e. there should be a paper trail)

I see an opportunity for scam artists to claim that (as they are now) the consumer owes money to them and to pay off their debt immediately to the scam artist.

With a clear paper/electronic trail, the path a debt takes from creditor to collector to collector can be verified and authenticated for the consumer's peace of mind, and so the right party gets paid.

The CFPB should require debt sellers to contact the debtor and inform them the debt has been sold. Additionally, ALL pertinent information must be given to the debtor to eliminate any confusion. Furthermore, the seller of the debt must be required and enforced to annotate the debtors credit report with the sale to help eliminate confusion and in a way to not increase the bad debt. Essentially, debts that are sold sometimes appear as two seperate debts on a consumers report which increases the penalty of having bad debt. A consumer should not be penalized twice for 1 debt.

The CFPB should require debt sellers to contact the debtor and inform them the debt has been sold. Additionally, ALL pertinent information must be given to the debtor to eliminate any confusion. Furthermore, the seller of the debt must be required and enforced to annotate the debtors credit report with the sale to help eliminate confusion and in a way to not increase the bad debt. Essentially, debts that are sold sometimes appear as two seperate debts on a consumers report which increases the penalty of having bad debt. A consumer should not be penalized twice for 1 debt.

Hi Sertas, thanks for commenting. CFPB wants to make sure consumers have the information they need without being overwhelmed. You mentioned consumers should have all pertinent information, but what information exactly do consumers need most? For example, would using the original creditor's name be enough to avoid customer confusion, and would this be enough to make it clear on a credit report that only one debt is involved?

The FICO impact on sold debts appearing twice needs to be addressed with the credit reporting agencies and the companies that create credit scores. Creditors have a right to report the status of a debt, and shouldn't be precluded just because it already appears by the previous creditor. However, the double penalty against the consumer is certainly unfair. But it's not the collectors' fault. It should be addressed in enforcement of the FCRA.

All creditors should be required to in writing inform the debtor who the debt has been sold to, what the debt collectors contact information is, and what number they can expect to receive calls from regarding the debt.

I have been in situations where I had no idea what a firm was actually trying to collect on because it had been passed along (presumably sold) so many times. Each time a debt is going to change hands the current debt-holder should be required to give full disclosure in writing and a clearly stated phone call as to where it's going, why and how the change will effect the debt - will there be a change in interest? In due date? In collection fees? In the way payments are applied or minimum payment amounts? This should be done with ample time for the consumer to understand the change and take any actions. There should also be the opportunity to refuse this process if it entails negative financial changes.

Hi erisgrrrl, welcome to Regulation Room. Thanks for your suggestion about how debt collectors could let a consumer know information like when their debt is sold. CFPB is concerned about balancing costs and benefits, especially because costs are likely to be passed on to the consumer. To reduce costs, what do you think of putting a phone number in the letter that the debt holder could call for more information? This might be a less costly solution than having the CFPB require both a letter and a phone call.

If a debt is to be sold, the owner of the debt should be required to send an itemized statement to the debtor. The statement should have a large-type header, something like, "[NAME OF CREDITOR] IS SELLING THIS DEBT TO [NAME OF DEBT BUYER]."

This would give the debtor another chance to pay in the simplest way, before getting tangled up in idiot phone calls, and it would help the debtor identify the debt.

I believe if a debt is being sold the consumer should be offered that debt at the amount the original entity is willing to sell it for.

The reason they can sell it for a fraction of what is owed is because the debt buyer is purchasing entire portfolios of bad debt. It spreads out the risk. If you can get a million other delinquent consumers to go in with you on a 10% offer, you could probably get them to take it. But it doesn't make financial sense for them to offer the same transaction to you as the debt buyer.

I had the same situation with another cellular carrier. It seems it's a ploy to keep making the debt seem fresh. It was another early termination fee, and I wrote many letters before it was finally removed from my credit report. I think that the tactic of selling the same debt to keep it on a credit report definitely should stop. It is one debt, and there is a time limit for how long it stays on one's credit report. One way to keep track of this is to require people to be notified if a debt is sold. It is required when a mortgage is sold. It seems like a no-brainer. The rules should also be written to discourage -- no, to bar -- collections companies from passing around debt for the purpose of keeping it on credit reports.

I concur with previous comment. If consumers are informed when our mortgages are sold that should be a rule across the board. Sending a letter by mail isn't very expensive, either. It should contain the amount, info on original debt, the name and address of who owns the debt and I'd even add the amount the debt was sold for. Consumers can keep track for one thing, and make sure these debts are not posted twice on our credit reports, it will let people know who to contact about the debt.

I think it should be kept uniform. Why differentiate between credit card or auto loans? It seems to make sense for sellers to send notification.

The buyer or seller should send the notice. You get a notice about collection without authenticity .?

Consumers generally have no notice and do not know that a debt has been sold until checking their credit report or until a collection agency calls to collect a debt.

Being notified of a debt being sold, would at least allow the consumer to verify who is actually the owner of a debt. (I once paid a debt to a collection agency, only to find that I had paid one of 3 collection agencies who claimed to own the debt).

With regards to costs, most consumers and most debt buyers are unable to detail how a 2200.00 debt becomes a 7000.00+ debt. And I found that very few even knew the original creditor's name, yet still attempted to collect this debt.

The new rule should at minimum state the Original Creditor's name, and that Debt Buyer has purchased the right to collect the debt. This would allow the consumer to verify that a debt buyer has the right to collect the debt.

Hi musicman82, welcome to RegulationRoom and thank you for your suggestions. Do you think consumers need any other information, either in the validation notice or a notice that the debt has been sold? CFPB has questions and ideas about what information should be in validation notices, including how fees should be broken down. You can join others talking about this on the topic page The "validation notice" sent to consumers.

Give Consumers Fair Notice and A Chance to Bid on Their Own Debts When Banks Sell Defaulted Obligations to Debt Buyers
When a consumer falls behind on loan or credit card payments, the bank often “sells” the account to a debt buying company for a few pennies on the dollar.
Debt buyers contribute nothing to society. Yet, they are allowed to obtain windfall profits by pursuing impoverished consumers for the full face value of such debts. This is unfair. If a bank is going to sell a consumer’s debt for pennies on the dollar, the bank should be required to notify that consumer, and allow that consumer a fair chance to bid on and purchase his/her own debt, on terms just as favorable as the terms offered to any other debt buyer. I hope the CFPB will consider new rules in this regard.

Please note there is currently a petition on the White House website for this issue at:
It was initiated here:

Thank you.

This option doesn't make economic sense. Debt buyers do serve a practical purpose because they allow the creditor to unload a massive amount of debt at one time. The cost of negotiating individual deals with each of those 1 million delinquent consumers would negate the benefit they get from the consolidated offload. Debt buyers allow the creditors to clear their books, which enables the cycle of lending to continue. The transaction between those two entities doesn't change what is actually owed on the account.

This is a fantastic idea. Right now, debt buyers buy debt for an average price of 4 cents on the dollar. Many debts are bought for 2-4 cents on the dollar and many other debts are given away for free. Once the original creditor has made the decision to sell the debt, they should try to contact the debtor one last time to let them have a chance to payoff their debt at a significantly reduced rate. If I were an original creditor, would like to get the most money I could for a debt owed to me. And so if I could get 10 cents on the dollar directly from the debtor, rather than 4 cents on the dollar from a debt buyer, then I would see no reason not to offer a significantly reduced debt settlement rate to the debtor (or as you call it, letting consumers bid on their own debt). Right now, original creditors offer no significant reduced rate to debtor before selling for 4 cents on the dollar. Most creditors barely even offer debtors 10% off the debt as a settlement offer. Sure, a creditor could more quickly offload portfolios to debt buyers by selling them at 4 cents on the dollar. But creditors could also make way more money offering a onetime chance at 10 cents on the dollar (or something really attractive but still more than 4 cents on the dollar). Perhaps the CFPB should make a rule that allows consumers/debtors the chance to receive a onetime offer that is valid for only X amount of days (maybe 45 days) from the date of the letter sent from their creditors of a significantly reduced rate. The offer would only be valid for a short amount of time and would also inform the consumer that, should the consumer not accept the offer, the creditor would then turn it over to a debt buyer. This letter would only be sent if the creditor’s intentions are to sell the debt and not just another attempt to collect. So that this way it gives the consumer one final chance to clear the debt owed and the creditors also have less loss and more profits and would be able to lend to more consumers, give better rates to consumers, and stimulate the economy. Because more money that is changing hands at higher values (10 cents on the dollar vs. 4 cents on the dollar) instead of sitting in the accounts receivable section waiting to be collected (one day, if ever) stimulates the economy. This rule would not negatively impact anything (or anyone) and only positively impacts everyone. One minor impact might be on the debt collection industry possibly receiving less debt in their portfolios that they buy, but this minor impact is offset by the large positive impacts on the economy.

not sure where to chime in so here I go..I have had years of experience with debt collectors and a lot to say...when my remarried I started getting calls about a few credit cards my spouse had fallen behind in. the amount was not disputed and after a lot of calls I got retirement funds and paid the debts..oddly which I did not like the collector when asked to send in the mail the details and agreement to the amount we had on the phone agreed on said "we don't do business that way, only by phone" well I did on the phone authorize the release of my bank funds for the amount he and I had agreed on but I had no proof no agreement what the debt was not that it had been paid..fortunately we were never again contacted about that debt . and when contacted about other past due debts from collectors again the phone was the only way they collected money ...a few thousand ..each time..I would like to see changes for the collectors to be required to mail the agreement of collection with the credit card numbers dates and amount

Welcome, Harry Osell, and thanks for sharing. Subtopic 3 of the post on Unlawful Collection Practices talks about payment methods. You can read more about that issue and comment there.

a second comment in recent years and I do mean years an ongoing debt collection annoyance has been the calls I get . When I do answer them they are always for someone I do not know that never lived here.. It happens all the time I have answered and said I don't know the person called and been told my number is removed from the call list..but that does not stop the calls either a non answer , or a computer , or being told to hold by a computer, and always always it is a person I have never heard of..figuring out how to stop different debt collectors from calling my number for people that do not live her and I have never heard of would be wonderful

I strongly believe when the original lender sells the debt to a JDB and the consumers pays off or settles the debt it should reflect paid or settled in the original lenders internal records.

As a former bill collector for over 17 years there are alot of ways the industry needs to be cleaned up. I do believe that a debtor should be informed of when a debt is transfered from original creditor to a collector and whether or not that collection agency purchased the debt or if the agency is contracted by the original creditor to collect the debt. There is a big misconception that I see being made in most of these comments that everything is "purchased" which is far from the truth! I personally have not and would not work for an agency that purchased debt, because I know and have heard the horror stories of not only how they treat the debtor but also how the business as a whole treats the collector.

Welcome to RegulationRoom, dnoel71, and thank you for sharing your thoughts. Can you tell us more about how it can be helpful for consumers to know that the debt was purchased rather than simply referred to a collection agency? Is there any other information that debt collectors can give in the notice to help consumers, or would it be better to include more detailed information in the validation notice instead?

I agree that it benefits everyone when notice of sale or assignment is given to the consumer. I am not aware of any part of the industry other than mortgage servicers who presently give notice. The benefit is clear - it reduces confusion, reduces the risk of misapplied/lost payments, and produces a clear chain of ownership. It would be costly to the creditors selling the debt, but not so much as to be prohibitive. Creditors have to send notices under a variety of other laws. I don't think this addition would make that much of a difference. I think the notice should state the account number, the entity to who it is being sold (including contact information) and the amount currently owed. It should be sent by the seller, who has the most current information for the consumer, and a copy should be provided to the debt buyer as part of the sale package.

If a bank is going to sell a consumer's debt, the bank should be required to notify that consumer IN ADVANCE, and allow that consumer a fair chance to bid on and purchase his/her own debt, on terms just as favorable as the terms offered to any other debt buyer (which at present is usually pennies on the dollar).

Debt buyers contribute nothing to society. Yet, they are allowed to obtain windfall profits by pursuing impoverished consumers for the full face value of such debts.

This proposal would entail changes more extensive that just "notice" as it would require a change from bulk loan sales, to requiring an opportunity to purchase individual loan in certain circumstances.

Welcome to RegulationRoom, CollectionDefenseGuy. At this stage, CFPB is looking for information on problems consumers and responsible debt collectors are having. CFPB doesn’t have legal authority over absolutely every aspect of debt collection, however, the agency will carefully consider what you and other commenters say here.

One theme we see throughout comments is that debt sold adds confusion as to whom is the creditor, and also triggers a new credit entry, making the debt appear as incremental (additional), when it is simply transferred, and fresh.

The solution to this is simple; do not allow credit bureaus to ever list more than one entry for the same debt. Put the burden of accurate recordkeeping on the bureaus, because they are the only entities who have a responsibility for accurate recordkeeping and they are paid to keep accurate records.

Currently the cost of sloppy systems is externalized to both creditors and borrowers, both of whom tend to re-externalize it to other creditors and borrowers in the form of higher costs. It is irrelevant whether these dual entries are caused by negligence, incompetence, or malice on the part of the creditor or collector because it is the responsibility of the credit reporting agency to make this practice impossible.

Adding steep fines for double reporting would incentivize CRA's to police their systems so each debt only garners one entry. Since CRA's are immune from libel suits in most of the country regulatory oversight is especially important. Conversely, clarifying that reporting agencies are not immune from state libel laws -- that regulatory authority is in addition to state defamation law -- would also quickly incentivize more accurate reporting.

Thank you for your comment michaelolenick, and welcome to RegulationRoom. Since you discussed CRAs, you may also be interested in reading and commenting on what CFPB has to say about reporting disputed debts to CRAs on the subtopic “What should happen with unverified debts?”.

Consumers normally are unaware that their debt has been sold to a collection agency. They, one day, get a call about the debt from someone unbeknownst to them. The collection agency wants the consumer to remit the payment to them, when actually, principal on the debt never decreases because the collection agency gets their cut (commission) off the top. The debt is there essentially, forever with added late charges, interest and other penalties. I submit to the CFPB to finalize the "Know Before You Owe" rule and to outlay the debt validation rules so that consumers can make an informed choice before wasting their money on a debt they may not owe.

Additional disclosures debt buyers (or sellers) should be required to make include the following:
1) how much was a debt sold for; and
2) If a debt buyer issues a 1099c issues with respect to a debt, then how much of a tax benefit are they claiming in connection with issuing the 1099c.

The first item should be disclosed for many reasons. For one thing, it impacts the fundamental fairness of the subsequent negotiation between consumer and debt buyer. Debt buyers and collectors may go on a tirade about personal responsibility and windfalls. However, it is at least debatable as to which-way such value judgments cut when a debt buyer is trying to get 100 dollars from an impoverished consumer on an account for which the debt buyer paid only 3 dollars. Debt buyers may say that their purchase price is not relevant to the legal rights they have purchased. However, a sense of fairness does matter in laws; it is why we humans make laws in the first place (or it least it is the polite justification for them). Thus if the price is not legally relevant to the rights the debt buyer is purchased, then regulations should be passed that make it legally relevant. In any case it is certainly relevant to the negotiation, insofar as it would impact what consumers are willing to pay, making it de facto relevant.

Second, debt buyers tend to issue 1099c's for the full face value of the alleged debt when the "forgive" it. This seems to imply a massive tax-fraud on the American public, because they are getting a tax-benefit that is worth far more than the asset that they purchased. This should be publicly disclosed to make it more difficult to get away with. If a debt buyer purchases a debt for 5-cents, then "forgives" the debt as being a $1.00 debt, issuing a 1099C for that amount, is the debt buyer claiming the full tax benefit of losing a $1.00 of income? Is that company really just buying $1 million dollar tax break for $10K? This is unfair for the consumers whose debts are implicated and also unfair for all of us who are supposed to benefit from tax revenues (i.e., all of us).

Debt was sold to another company. So now debt is listed on my credit twice. So debt will last more than 10 years on report. Plus I've been a victim of identity theft twice. Both times I reported it to the police and to the credit agencies. Unfortunately nothing police can do but write a report for proof. Credit agency was ordered to put a fraud alert on my social but fail to do so.

Get a copy of the police report and mail it to all three. They HAVE to put a freeze on your report, and you get a pin, and if you have to lift it you need to have that pin. It is quite a pain. I had a burglary in 2012 -- 14 pages of items stolen, I had to call all my credit cards and get issued new ones. Heartbreaking --not just things like my computer, but items of great value, and great sentimental value. The least you should have is the peace of mind of having a freeze on your report. And they HAVE to do it. Otherwise, go to a lawyer and let them dangle on the end of the meat hook. It is a pain, but worth doing.

Notification that a debt is being sold would be ideal as it would afford the debtor the opportunity to negotiate the amount and possibly assist in thwarting any potential negative reporting on one's credit report. If a debtor is afforded the opportunity to negotiate his or her debt for a reasonable amount, perhaps the selling and reselling of debt may be marginalized. More and more consumers have emails and other modes of communication and therefore, it would be in the best interest of all parties to amicably resolve issues. However, should the dispute not be quelled, reasonable arrangements should be afforded to the debtor. Debts as assets is an outrageous concept and it behooves both the debtor and the creditor to "work-it-out". That is in the best interest of all. It begins with information, communication and resolution.

There ought to be a limit on the number of times that debt can be sold.

2|Notice that the debt has been turned over to a collector - 59

Agency Proposal

Many consumers find out that their overdue debts have been turned over to a collector when the collector contacts them to start collection. If the debt is placed for collection several times with different collectors, consumers may become confused. CFPB wants to know whether federal law should require that consumers be told when their debts are first put in collection.

  • Current practice: Do consumers already get any warning other than the validation notice that the owner of their debt is turning it over to a collector? If so, what information do they get and how do they get it?
  • Benefits: How would getting notice help consumers? (Be as specific as possible).
  • Costs: What expenses or problems would debt owners or collectors have with giving notice? Would these be different for different kinds of debt, or different kinds of debt owners or collectors? (Be as specific as possible).
  • New rule: What information should be in such a notice? Should the debt owner or the debt collector have to send the notice, and why?
Related topic: The “validation notice” sent to consumers.
See what CFPB said in the ANPRM about Information Debt Owner, Debt Buyer, or Third-Party Collector Provides to Consumer Upon Sale or Placement of Debt.


Commenting is now closed.

Assuming debtors have a valid address, which is some cases they do not, additional notice that the debt is being assigned to a third party collection entity is no benefit. My experience is intervention to collect by a third party normally occurs when the consumer is over 180 contractual delinquent. Furthermore, if the consumer receives the warning the account would be placed with a third party so how many different contacts would occur??? Many and more confusing to the consumer and agency.

What do others think about RBell's point that receiving too many notices can be confusing for consumers?

Agree with RBell. Delinquent borrowers already almost always know they're delinquent so further notices are not productive. When notices are provided they should include the name of the original account holder and the full account number to establish a connection between any tier debt collector and the original account holder.

I agree. Most creditors already have this information in contracts and other correspondence to the debtor. This additional notice is unnecessary would be cumbersome and costly.

Hi RBell,

While Demand Letters can be ineffective for the purpose of collecting a debt, "notice is the hallmark of fairness." It's more important that people are held to standards, which, in turn, help to eliminate abusive practices. Procedural safeguards, like demand letters, are an important standard regardless of their effectiveness.

Welcome to RegulationRoom, StevenOren, and thanks for your comment. Under current federal law, collectors have to send a "validation notice" within five days of contacting a consumer about a debt. CFPB wants to know if this is enough notice, or should consumers also be told when their debts are sold to new owners or turned over to a collector? The agency is also asking what information should be in validation notices to help consumers recognize the debt. You can read more about the agency's questions on the topic page about the"validation notice" sent to consumers.

No, it is not even clear who a debt collector is, particularly under CA law. The person sending the validating notice is typically a debt collector. This just causes confusion.

You can always check with the original creditor.

When debt collectors send that Validation Notice, they are required to state the creditor to whom the debt is owed. I think that is sufficient notice that the debt is being assigned for collection. I commented on the other thread that I DO believe notice should be given when the debt is sold. But if the current creditor is retaining ownership but just assigning it to a collection agency or law firm, they will be notified when that agency contacts them and sends a Validation Notice. Besides, the collection agency or law firm may end up refusing to accept the account due to a conflict or a variety of other reasons. Giving notice that ends up being false would certainly cause confusion.

I sympathize with people who have debts, but I am also a physician and some of my pts owe our practice money. They receive numerous statements first, and a phone number to call to discuss. We give people a lot of leeway, and try and set up payment plans, but it's frustrating when there is no response, and then they end up going to collections which is bad for all.

My company calls, auto-dials, emails, and snail mails customers many times before they are sent to a collection agency. Many debtors simply refuse to respond to the original debtor. They only make payment after the account is assigned to a collection agency -- akin to seeing just how far they can go before there's a consequence to not making payment. Requiring a validation notice from the owner of the debt should be optional on the creditor's part. The FDCPA requires the collection agency to send their first notice after the debt is assigned. More notices from the creditor are useless and expensive. And the single most frequently used excuse of any debtor is "I didn't receive the letter/invoice/statement".

A first class letter costs $0.55 minimum (inclusive of postage, paper, and envelope). That cost does not include overhead and employee cost. Multiply that cost by the number of notices and statements already sent (and ignored) and you begin to see the true cost of collection.

That's the price of being in the business. If debt collectors can't hack it in the real world, then they need to find another business industry to be for their "careers."

As a consumer I should receive a notice or some type of warning that the debt will be turned over to a collector. And when there are a change in debt collectors, the consumer should be notified.

Consumers are typically notified numerous times before the account is sent to a collection agency. It is in the best interests of the credit union to try and resolve the delinquency before it is sent to a collection agency due to the added cost.

You know, my only experience is with medical debts, but with those, we have NOT been notified several times, or sometimes, even one time. No one seems to care if the address is right (and when you're dealing with an old person, the billing address is often not the same as the physical address); sometimes the bill seems to go to what they claim is a collection agency even before the insurance company finishes with it. We are perfectly happy to pay our bills, but our contract is with the provider, and that's who we pay, not a collection agency.

Consumers should be aware of who is handling collection procedures. The seller of any consumer debt should be required to notify the debtor of which debt owed to which creditor, is being sold by xyz organization to 123 debt collector. The effective date of the debt sale and contact info for the new collector should be included.

It has been my experience that practices can vary greatly between various creditors who find it necessary to turn delinquent or defaulted debt over to a collection agnency. In my situation, little or no notification was given. At a minimum, a creditor should give specific information as to date and which company the debt is being assigned or sold to. Getting such a notice would help me understand that there is going to be a change with whom I would be communicating with going forward. The costs and expenses or problems that dad honors are collectors would have been giving those is miniscule compared to the problems cause by not giving notice. I would argue that they would actually save money in the long run like giving such notices. At a minimum, The information that should be clear that in the notice is (1) the date of when the debt would be turned over to collection agency; (2) the name address of the collection constant company to whom the doubt was assigned; and (3) specific formation about the debt collection company and a list of that company's "best practices", policies and procedures as to what the consumer can expect. It would be good if there could be a single-point-of-contact for this company as well as the supervisors and owner of the collection company. Collection agencies need to be forced to deal more forthrightly with consumers and be required to deal with greater transparency.

Welcome to RegulationRoom, OneFrustratedCommenter, and thank you for your comment. Please see the topic, The validation notice sent to consumers, to talk more about the information consumers should receive when a debt is sold or assigned. Currently, it only has to contain the amount of the debt and the name of the current owner of the debt and the amount. CFPB is wondering about other types of information, including the name and contact information of the original creditor.

This is entirely too much information to require. It's not the job of creditors or collectors to send notices about "best practices" or personnel information. This thread is about notice that a debt is assigned to collection. NOT sold, but simply outsourced to someone who specializes in collecting past due debts. Notices is given when the validation notice is sent. The company who sends it is the collector; the letter itself will state the name of the creditor to whom the debt is owed. That's enough.

Welcome to RegulationRoom RHN91362, and thank you for your comments. CFPB has questions on how to make sure that validation notices give consumers enough information to figure out whether or not the debt belongs to them. For example, even if the name of the current debt owner is on the notice, consumers may not recognize the debt because they may be more familiar with the creditor’s brand name or the notice includes the name of the new owner, but not the old one. What do you think about this? You can read more about CFPB’s questions on the topic page about the “validation notice” sent to consumers.

As a mortgage lender for an FDIC-insured bank, I'm astounded at the number of customers who sit across from me and are wholly dumbfounded when I tell them their loan request is denied because of outstanding collections. For certain there are some people who knew full well they would have collections items and are playing dumb (and not doing so very well). But many of them had no clue, and 90% of those collections are medical in nature. If the CFPB truly is about protecting the interests of the consumer, then the debt collection process needs to be simplified drastically in regard to collection items (medical, utilities, etc.). Try this on for size: after 60 days of non-payment, the account can be closed. The creditor sends a certified letter to the last known address of the debtor, informing them they have 30 days to bring the account current or make other payment arrangements, or the account will be turned over to a collection agency. Said letter also needs to contain the contact information for that collection agency, so they know in advance who to contact if they don't respond within 30 days. Yes, a lot of those letters will be returned undeliverable or will end up in someone else's hands. But that would demonstrate a good faith effort by the creditors to work with the debtors before passing the buck to a collection agency. The added benefit for the government is the increase in certified letters passing through the USPS!

Creditors generally do not send accounts to collection until after they have sent multiple notices. Requiring a specific notice will expose small creditors to liability beyond any benefit to consumers.

Thank you for joining the discussion, emmacollector. Can you tell us more about the liability issue you mentioned?

CFPB wants to balance costs and benefits in any rule it might propose, so it would help to know more about specific costs.

That's business. Debt collectors--small, medium, and large--know the cost of doing business. And if they don't know, then they need to find a new "career."

Every debt I've ever had go in to collections has supposedly been given notice in advance. In the case of 2 hospital bills many years ago they claimed to have notified me by mail several times but I had never even received the initial bill let alone the follow ups. Since I was insured at the time I only had to pay a reasonable co-pay and would have readily done so had I gotten the bills (as additional information, in both cases I offered to pay at the time of visit and was told they only bill). This particular hospital has an "in house" collections department so I get the impression that they often neglect to actually send info to patients so that they can then collect the additional fees and interest as profit.
When a debt is turned to collections I feel it might be best if a mandatory 30 day notice outlining what the debt is for, previous contact attempts, amount due, available options such as payment plans and the exact effect of the collections process on the debt is sent to the person in a manner that is trackable and shows the intended recipient had the notice in their possession-perhaps a registered receipt type of delivery.

All creditors send out mutiple letters and make numerous phone calls to the consumer to give them a chance to pay their just incurred debt - and those letters will include the warning that the account will be turned over to a collection agency - not always SOLD to a collection agency, but they hire an agency to collect the debt on their behalf. And then the collection agency sends out multiple letters and makes calls. If the consumer feels this is not enough notice I am not sure what more can be done. Consumers should talk to their creditors instead of ignoring the calls and letters and try to work out some kind of arrangement. But instead some do not want to take responisibility for their debt and try to push additional costs on the creditors because there were not enough letters sent out. It would be okay if the consumer wants more & more communications if the creditor or agency can bill the consumer for the postage. People wonder why the cost of health care and merchandise goes up - it is because consumers that do not pay their debts and requests laws that require the creditor to spend more and more time and money to try to collect

All? It's just not so. Maybe retailers do; I have no experience with them. But medical billers are consistently mistaken, careless, and just plain wrong. One medical facility called my daughter-in-law's cell phone about a bill for my mother! (They had her number as, I think, the fourth emergency number.) And this was a GOOD place, that actually tried and finally managed to get in touch with me. I was very pleased with their billing department, compared to others we had dealt with.

Thank you for your comments, compliance2013. The FDCPA has a dual purpose, to protect consumers and ensure that responsible debt collectors aren’t driven out of business by abusive companies. From your perspective, do you have suggestions for CFPB for coming up with rules that make it easier to tell irresponsible from responsible collectors.

Actually there should always be more communication about specific things, rather than less. More communication from the Original Creditors that an account will be turned over to a collector and when. And when a debt collector then turns it over or sells to someone else there should be more communication about who. Just like when mortgages are sold to other servicers, the borrowers get letters informing them of who now owns their mortgage and who now to send payment to. This should be standard practice for debt collectors. Explaining to the debtor that they have turned the account to someone else and that all payment and communication should now be directed to the new guy (even if no payments were sent to the first debt collector.) Because there are debtors who can't make payment now but can later, and if they start sending payment to an old debt collector via an old letter they got in the mail, then debtors attempts to actually resolve the debt go by the wayside. More communication about who/what/where/how is necessary.

I was sent to collection. Collector informed me that it was for and overdue insurance payment. Having everything on Auto-Pay, I overlooked the notice they mailed to me. One call to my agent and the problem was resolved. I'm glad they called and gave me the opportunity to get to root of problem before it jeopardized my good credit rating! I "know" the majority of CFPB complaints come from people who simply don't want to pay their bill. I know this because I have worked for a collection agency for the last twenty years, privy to all complaints we receive and very, very few have any merit. I'm by no means stating that some people don't have legitimate complaints. What I am saying is if we compare the number of complaints to the number of accounts being pursued by all collection agencies the percentage of complaints would be a mere fraction of one percent. So, how much more regulation is necessary to address such a tiny percentage?

The name of the agency is the CONSUMER Financial Protection Bureau not the Collector Financial Protection Bureau. The industry have their lobbyists and consumers have the CFPB. The goal is to protect consumers from illegal practices by certain industries and that sometimes means more regulations.

Preserving the industry DOES protect consumers. If there isn't a lawful and enforceable way of collecting money that is owed, then future consumers will pay the price in increased cost for credit, or denial of credit entirely due to risk.

I see what you mean, but that tiny percentage suffers incredible annoyance and harassment. Should they pay what they don't owe, merely to get out from under? All we've ever asked for is an itemized bill from the original creditor, but the collectors act as if that's too much. And they say--and probably believe--that we've received other bills, but we haven't. We've lived in the same place for 30 years--how awful it must be for people who move a lot.

If a debt is to be turned over to a collection agency, the owner of the debt should be required to send a fully itemized statement to the debtor. The statement should have a large-type header, something like, "[NAME OF CREDITOR] IS TURNING THIS DEBT OVER TO [NAME], A DEBT COLLECTION AGENCY."

This would give the debtor another chance to pay in the simplest way, before getting tangled up in idiot phone calls, and it would help the debtor identify the debt.

The debt owner already has the itemized bill; it would be just a matter of copying it again and sending it.

Also (because I don't know if this is covered later in the discussion questions), there should be a requirement that the original creditor make a true, good-faith effort to contact the debtor. I've dealt with those who do this, and those who don't. Some will send you a bill, and then when they get no answer, call you and check the address, which is often wrong. Some, it seems, hardly wait for the ink to dry on their first bill before they turn it over to collection.

Hi Bonita, welcome to Regulation Room. I believe what you are saying is that any time a debt will be sold the debtor should be given notice and a chance to pay off the debt before the debt is sold. Is this right? Does anyone else agree or disagree with this suggestion?

Yep, that's right. Isn't the point supposed to be to collect the debt?

I would like to see requirements that the consumers are required to provide written notice of any new addresses for the creditor to reach them so in the event the account does go into default, the creditor has current information to attempt to contact the consumer. Many consumers move frequently, yet fail to update the creditors

I believe that this practice in already in place in three major ways. The creditor usually already requires all of their customers to provided updated contact information, Once a consumer moves the address change and other contact information changes are updated on the consumers credit report, and finally, The USPS has records of mail forwarding procedures once a consumer moves.

First, there may be a requirement to notify the creditor of changes, but many consumers don't, and second a consumer has to complete an NCOA for the post office to have record of it. Many don't. If there is a requirement that a creditor is to provide notice of a sale of the debt, pending sale, or sending the account off to collection, there shouldn't be liability on the creditor if they lack the updated information to actually reach the consumer. I don't want to see any FDCPA strict liability requirement that this notice must be given, but because the consumer has moved and failed to update the creditor and notice is not received, the creditor or debt collector is then stuck defending a lawsuit. If the creditor does not receive notice of an updated address, don't have strict liability that any notice reach the consumer.

You raise an issue that has two distinct definitions: "sent" and "received" I don't think that any consumer wishes that they "receive" a notice that wasn't "sent" in the first place. In addition, letters and parcels get lost in the mail all the time. If there is a requirement for a credit/collector to "send" the notices you are referring to, the first place to send them are going to be an address that is on file. If the letters then get returned, then you would know that they are not at the address that is on file. But the letters have to be "sent" in the first place.

You are correct. There is quite a difference between send and receive. All I am suggesting is that a creditor only be required to send any notice to the last known address - not that the consumer receive it. If it is returned with a new address (and you presume too much if you think that all mail is returned if not delivered to the proper recipeint), then the creditor must send the notice to that new address. If the point of this dialogue is to ensure the consumer is protected, then require the consumer to protect themselves and provide this information to the creditor. If they don't then a creditor can't be hanged in a lawsuit for a letter failing to reach a consumer, when the creditor actions used the best information on hand.

Thank you for your comment, MER. Based on your experience, what do collectors do when a consumer’s address is out-of-date? What about other ways of contacting the consumer, such as phone calls and emails? Please consider sharing more information or suggestions under our locating consumers topic post here. In addition, you may want to join the conversation on notifying consumers when a debt has been sold here. Do you think consumers may be more likely to update their address if they have contact information for the current debt owner or collector?

It is a shame that there is no topic on this site that analyzes the absolute inflexibility that occurs once an INVOLUNTARY DEFAULT has occurred .

If I go through a red light, have broken the agreement/law by doing so? What if I looked both way and proceeded through the intersection because there was a truck behind me that was not stopping? Suddenly the parameter of whether the law was broken has to be reconsidered. This RECONSIDERATION is NOT being evaluated for debtors/defaulters. A default is a default no matter what, and that is what is ruining the world's economy, not just the U.S. economy.

Why do we allow credit card defaults and student loan defaults to have no mitigating circumstances when if we did allow mitigating circumstances judges would actually have some wiggle room to at the VERY LEAST, suspend the accrual of more and more interest rate charges, penalties, and fees from the time the debt occurred.

The CFPB is basically helping to legitimize and reinforce a credit card companies right to sell a SERIOUSLY and PURPOSELY FLAWED PRODUCT that once consumed will lead to a lifetime of debt indenturedness. This is not my opinion, this is fact born out by the justice department's own report that consumer debt levels ONLY GO UP as people age, they NEVER go down.

You can read a pre-emptive conclusion about all of these comments being left that basically shows the consumer feedback being given here to be not much more than pablum therapy. Here's the link. WARNING: NOTHING WILL CHANGE REGARDING DEFAULT and a DEBTOR'S RIGHT to DECLARE THEIR DEFAULT an INVOLUNTARY DEFAULT, NOTHING WILL CHANGE in REGARDS to GIVING JUDGES MORE LATITUDE to FREEZE a DEBT WHERE it was at the TIME of the DEFAULT so the DEBTOR CAN EVENTUALLY PAY IT OFF.

Sorry for the grammatical errors. I went over my comment above before posting it, not sure how the "I" got left out or how the plural was taken out of another word.

Welcome back, Debt Neutrality Petition. At this stage, CFPB wants information about the kinds of problems consumers face in debt collection. As it moves on to the next stage (coming up with actual proposals for new federal rules), CFPB will consider your concerns about default rules, along with all the other discussion on RegulationRoom. The law about debt defenses and default judgments is a complicated mix of federal and state law, and CFPB doesn’t have authority to regulate absolutely every aspect of debt collection. But, you and other commenters can be sure that CFPB will carefully consider all the ideas and concerns raised in this discussion.

Breaking a promise to pay isn't the same as breaking the law. We can't keep comparing criminal law to civil law because it's just not the same. But the item that's missing here is the legitimacy of interest. Forget about big banks for a minute, and think about borrowing money from a friend or neighbor. When you keep money that is rightfully owed to someone else, you damage him, because he doesn't have that money, which he could be investing (to increase it) or spending (to improve his quality of life). That's one of the reasons that interest exists - to compensate someone for the loss of their money for a portion of time until it gets repaid. I'm not saying interest rates aren't excessive -- they certainly are -- unfortunately, that's a separate issue. But suspending interest all together and allowing a debtor to freeze the amount of his debt indefinitely, because he borrowed more than he could pay back and didn't plan for unexpected expenses.... I don't know anyone who would loan money under those terms, except for maybe Mom and Dad.

The "promise to pay" meme has not been fairly vetted in the credit card agreement, that is the issue here for me.

Credit Card companies are not required to mention in very visible lettering in the agreement (if its even mentioned at all) that under no circumstances will a bank or credit card company ever suspend a debt.

Credit card companies enjoy an unfair perk at the expense of the consumer by not disclosing their most glaring warts at the time the agreement is signed by the customer, and that seems to be a violation of the spirit and purpose of an adhesion contract.

Those Capital One commercials with the baby and Jimmy Fallon are false advertising in my opinion since Capital One is not really pro family or pro community. If Capital One was either pro family or pro community, they would either offer a REASONABLY priced debt suspension insurance program, or simply agree that a natural disaster or personal emergency beyond their customer's control is not cause to declare a default or to penalize the customer with ongoing interest rate charges.

Apparently the customer does not have the right to suspend a debt under any circumstance unless they declare bankruptcy. If credit card customers don't have the right to suspend a credit card debt under any circumstance, then that should be specifically mentioned and clearly visible in the agreement before the customer signs the agreement.

Your comment appears to have attempted to personalize money and I find that controversial. The fed is giving out money at zero percent interest to the banks, yet if a person has a situation beyond their control occur that causes them to need zero percent interest to pay back their UNSECURED debt, somehow that is different??? How can an unsecured debt actually be more secure than a secured debt?

I would suggest that narrowing the discussion to "the people's money" obfuscates that the fed gives "free money" to banks and wall street. This free money (zero percent interest) eventually leads to toxic wall street investment schemes and scams that then cause the middle class to lose their existing home equity and 401K wealth while wall street then gets bailed out by the government.

The desire for ongoing perpetual economic growth has created a world in which debt has now become the enemy, whereas in the past debt was not the enemy. Reinforcing the old "economic growth by increasing consumer debt" paradigm continues to sink the U.S. further and further into economic chaos because it requires the consumer be saddled with more and more debt and less and less avenues to pay it off.

How can the economic growth model suddenly not work anymore? To get a better paying job in society one needs computer skills that create ways to achieve greater economic efficiency, which over time results in the loss of main street blue collar jobs that are not computer based. The people with the money are creating profits via computer jobs and a satellite economy while reducing blue collar jobs, meaning blue collar debts are becoming harder to pay off.

The letter I received just said this communication is for the purpose of collecting a debt. First, it was supposed to be a "validation" letter, but they don't bother to validate they jump the gun.
Communication is always the best way to avoid confusion, so I don't think it would be a hardship on anyone to state clearly this is a debt collection agency/company -- why use euphemisms. And then to state unless such and such is paid by (whatever time frame is legal) this will be placed in collection. I believe there is some rule now to that effect, what I think the problem is, it is not handled consistently. Each of these many many debt collectors do their own thing. Some are better at communicating than others. Some deliberately do NOT communicate, for deliberate reasons.
Crafting consistent rules and regulations should be the start. And then actually requiring these companies follow them. If you don't put teeth into it, none of these collection agencies will bother. There are already rules. But we are here because of lack of obeying the law, lack of ethics, lack of clarity in the law, and in my opinion, laws that are slanted against the consumer.

Your point is understandable; however the statement you referred to is known as the mini-Miranda. This statement is a requirement in a debt collector's initial communication (and in some states every communication). Typically, the validation verbiage is included in a sheet of it's own with several other disclosures a debt collector is required to provide. As far as law being slanted against the consumer, I would disagree. The laws surrounding contacting consumers and the information required to be given is quite stringent, the problem is the channels which are directly regulated by the law are outdated. The primary law that regulates a debt collector was written in the 70's and did not directly define that is thrown around all too often, harassment (among others). Because of this, if a debt collector sends a letter and makes a phone call, he may very well be held accountable in a court of law for "harassment". Most collectors settle out of court as defending a suit as frivolous as the one described above would cost much more than settling with a consumer.

Welcome to RegulationRoom, DLin, and thank you for your comments. How would you recommend updating the laws on how debt collectors can contact consumers? CFPB is asking questions about the issues you raised, which you can read and reply to on the topic pages about validation notices, phone calls, and harassment.

It's important to understand that a Validation Notice (sent within 5 days pursuant to 1692g) is NOT a validation of debt. It's a NOTICE of your right to validation, if you choose to invoke it. I do agree that there should be additional regulation around this issue. But part of the problem is the way the statute is written. Most collectors cite 1692g verbatim to avoid liability for misleading consumers. But it's kind of a big convoluted sentence that the average person can't understand. I'd like to see a plain language amendment to that section of the FDCPA, which I will discuss further in the appropriate thread.

Clear communication helps everyone, not just consumers. I think debt collectors when trying to collect just send bills, and everyone knows what a bill is. But when they devolve into harassment, they blur the lines between trying to collect debt within the law and behaving in misleading and abusive ways toward consumers.
As many nasty letters these collection companies send out, how can they object to spending money on a letter giving notice? TRuly, the robot calling, the letters, they have money enough for this. If they communicated clearly up front, they would save more money. The post office is still a good deal, not an expensive way to communicate.
You are missing the boat on the problem, though. It is not the costs or whether they should communicate. Most of these companies hire people who are barely literate, poorly trained and certainly uninformed -- wait, UNINFORMED -- about the laws that already exist regarding debt collection. That is a huge problem when trying to get information from an employee who doesn't know the law requires him/her to provide certain information.
This has come about from decades of lack of oversight, in my opinion. Lack of oversight, lack of clear rules and lack of enforcement. So, if they don't have to worry about following the law, they hire whoever they can cheap and don't bother to train them. This is why there are so many of these companies and after some of them do get in trouble, they just change their name and keep on doing the same law-breaking habits.

From my experience debt collection today has become a crutch for organizations that are too lazy to do the decent thing and have a discussion with the debtor BEFORE engaging a debt collection agency. Case in point is the debt collection notice I received from a collection agency attempting to collect medical debt that was over a year old and the medical facility has never contacted me by phone or via mail about the debt. Boom - debt collection agency is involved. The debt is not valid and this is the 3rd debt collection agency that has attempted to pursue the same debt. I challenge the validity of the debt and ask that statements or invoices related to the debt be sent so I can verify if the debt actually exists - no response. Yet like clock work every five months this debt is referred to a new debt collector without closure on the challenge I made to the previous debt collector about the validity of the debt. It just keeps churning without resolution. My fear is that ultimately the medical facility will just stop trying to collect the debt and play their ultimate ace-in-the-hole and just make a notation in my credit record about the debt and I will then have to negotiate having the debt removed from my credit record whenever I apply for consumer loan. That is a major shift in power in that all the "protections" I may enjoy in dealing with a debt collector, I have no power with a credit bureau. It a case of either clearing (i.e., pay) the debt or not get a loan. After all is said and done I believe that creditors should have to prove that they have contacted the consumer before they are allowed to refer and debt to collection. The debt collection system is rife with lack of due process in this aspect. Secondly, I believe that if a debt has been referred to collection and the consumer has challenged the validity of the debt, then there is an obligation by the debt collection agency to act on and resolve the challenge. There appears to be no such requirement currently since the same debts are getting rolled over to new collection agencies instead of being resolved. The goal of debt collection should be to resolve contentious debt situations not merely to brow beat the consumer into submission. Third, debt collection agencies need to stop the practice of disguising their collection notifications as junk mail with the intent of hoping the consumer will throw the correspondence away on first glance. Debt collectors in my state routinely use return addresses from Mississippi and no accompanying postmark (using bulk mail designations from the post office just like junk mailings) knowing that if a consumer does not respond within 30 days of notification of a debt then all debt collection protections are essentially waived. We need much more honesty and a level playing field in the debt collection industry. We need a way to ensure that ALL parties involved in debt collection are sensible and forthright and above board. Currently it is a cut throat us vs them scenario which brings out the worst in people.

Thank you for sharing your experience, cmfritts. CFPB is thinking about how it should address debts that have been turned over to collectors. You suggest that there should be some communication between the creditor and the debtor before engaging a collector. The current law says that debt collectors must send consumers a "validation notice" with information about the debt within 5 days after contacting them, so consumers can verify if they owe it or not. The current validation notice only gives the name of the current debt owner, the amount of the debt, and how consumers can challenge it. What additional information should be included in a notice when the owner of the debt turns it over to a collector? You can find out more about this matter and discuss with other commenters in the topic The "validation notice" sent to consumers.

You also mentioned that you challenged a debt, but other collectors are claiming this same debt without resolving it. The current law gives the right to dispute a debt, but it doesn't explain what "dispute" is. Do you think that if a consumer challenges a debt, as happened in your case, this should be considered a dispute? You can join other consumers who are discussing this problem in the topic When consumers dispute a debt, subtopic "What should count as 'dispute'?"

I agree and endorse what CMFritts says: This is the entire issue: all parties be above board and honest. But where does one find the most abuses? The most mistakes that can have a tremendous impact?
Uniformity in the law is a start, and when the abusers continue to make mistakes there should be financial sanctions against them.

It is my companies practice to send a validation of debt notice to nearly all accounts placed. This is not required but a best practice. I also believe in most cases the original creditor provides notices to the consumer on their bill if they are going to be referred to collections. Also it is time to be realistic. Is it possible that a consumer is not notified of a transfer to collections? Yes. But that being said most if not all consumers know they have not paid their bill beyond 30 days and they could be sent to collections. It is time personal responsibility plaid a part in rule making and that the rules apply to the vast majority of circumstances instead of trying to account for the rare occurrences where the process does not work fully.

Accounts turned over for outside collection should be required to have a unique Collection ID that can be tracked across credit reports and as debt is sold to other agencies.

First, the biggest problem with this entire issue of debt collection is summed up like this: the onus is on the consumer/debtor.
Consumers/debtors have the onus to prove harassment (by going to court). Consumers have to write to validate or invalidate debt and far too often the debt collector claims to never receive such a letter. I have a case in point with one company I sent a letter disputing the debt. And despite filing a complaint with this CFPB, once again, I got shafted. They did nothing to make the company acknowledge I wrote them in time and disputed the debt.

I would say that the first order of business is to make any new rules consistent. And enforce them.

Right now, people get letters from debt collectors -- or maybe phone calls -- and they are often not signed, tell you to write a post office box, they are vague about the origin of the debt but sure like to make threats, whether abusive or subtle.

I think all letters notifying consumers should be signed by an actual person who works for the debt collector. They also should provide a physical address, so we can send letters certified. Sending a certified letter is a bit more difficult to just "oh we never got anything."

You need to do more. These collection companies get into trouble, and they change their name and just go on doing the same thing that got them into trouble.

If the person disputes the debt there should be a requirement that says so and so disputed the debt. What happens is these companies don't take any of the laws on the books seriously at all. If they did, they wouldn't harass people at work, at home at all. If the onus wasn't on the person to have to hire a lawyer and sue for what -- a maximium of $1,000 -- these companies would put a lot more thought into making sure their facts were accurate.

And something desperately needs to be done to make these credit reporting companies be more responsible. How many times I've lost count where they just say "we are only reporting what they tell us" and I ask but don't you verify if it is accurate and they say oh that's not our job. This is what makes this system rife for abuse.

You are focusing on ONE thing: the validation letter. But this is a multi-faceted issue involving the original person who claims a debt is owed, the debt collection company and the credit reporting company. And in the end, it is always the consumer who bears the brunt of so many errors.

You also need to enforce rules that are there on the books. If someone sends a letter disputing a debt, these companies need to state that.
A validation letter is just one thing. A bonafide employee needs to sign the letter, and provide a physical address in which they will get certified letters to prove a person has written a dispute within the time frame.
God help us when these "debts" travel from company to company -- quite often to circumvent laws on the books that limit the amount of debt or prevent the amount from changing around and abusing the length of time these debts can stay on a credit report. That is something easy to fix: enforce the rules. One company bought the debt, it doesn't get moved on without that company notifying the credit reporting agency so this isn't reported as ten debts or whatever.
Please, also, don't tip toe around this and say "consumers are confused" by the number of companies. Let's face facts: it is deliberate maneuvering by these companies using different names to pressure and take shots at a person's credit report to make it look worse than it is. It's deliberate.
You need to hold all accountable: the debt collectors who for sooooooooo very long have abused the laws that do exist and know nothing will happen, and the credit reporting agencies who are 1) in bed with these debt collectors and 2) report anything regardless of its accuracy and then tell the consumer oh it's your problem.
And disclosure. If any of these debt collection companies are owned by these credit reporting agencies like Equifax or Experian etc., or have any type of business relationship beyond reporting they should be barred from debt collecting because it's a conflict of interest.
Too tough? No. It's just common sense and time to be fair.


To the comment by Millertime. I disagree. Keeping a paper trail protects everyone, especially the most vulnerable and least able to protect oneself.

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