Closed Rule

Consumer Debt Collection Practices (ANPRM)

Summary

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 The "validation notice" sent to consumers - 104

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Subtopics

1|Info that might help consumers recognize the debt - 45

Agency Proposal

Now, debt collectors must send consumers a “validation notice” within 5 days of first contacting them (FDCPA § 809). One reason for the notice is to help consumers figure out if the debt collector is going after the wrong person.

The validation notice has to contain the amount of the debt and the name of the current owner of the debt (FDCPA § 809(1)(2)). CFPB wonders whether consumers need more information to recognize the debt as one that they really owe. Here are possibilities:

  1. Name and address of debtor. (This info will be on the envelope if the validation notice is mailed, but it might not always come by mail. See below: Format of the notice.)
  2. Names and addresses of other people responsible for the debt.
  3. Debtor’s partial social security number (for privacy reasons).
  4. Original creditor’s account number (or part of the number, for privacy/security reasons).
  5. The name and contact information of the original creditor if that’s different from the current owner. (See Telling Consumers what’s happening with their debts—Notice that the debt has been sold.)
  6. The brand name the consumer would recognize as the company they originally dealt with, if that’s different from the original creditor’s legal name.
  7. Date and amount of the last payment the consumer made on the debt.
  8. Copy of the last billing or periodic statement sent to the consumer.
  9. The type of debt (student loan, auto loan, etc).
  10. For debts from testing labs or other medical services, the name of the doctor, medical group, or hospital (a name the consumer would associate with having gotten these services).
  • Current practice: How much of this information do debt collectors and debt buyers have now?
  • Costs: What expense or problems would debt collectors and buyers have with giving consumers this information?
  • Benefits: Which of these will help consumers most, and why?
Related topic: Making sure debt buyers & collectors have info about the debt.
Read with CFPB said in the ANPRM about Validation Notices, Current Owner of the Debt, and Additional Information.

Comments45

Commenting is now closed.

I have been contacted about a collection agency that stated that an old prescription charge was unpaid. The total was like $1500. When I asked for proof, I received a piece of paper that had three numbers on it that added up to $1500. Nothing more. Literally.

When a consumer asks for proof, they should at the very least receive a fully itemized listing of what it is is being collecting upon. (e.g. a detailed statement of account, or the un-paid invoice(s).) Additionally, consumers should receive documentation as to why they are legally responsible. (E.g. an agreement that they signed.)

I realize that for businesses that traffic in unpaid consumer debt this is going to be a huge burden as this information has long been lost. Too bad.

At the very least, this should be the standard for any debts incurred after a certain date.

Consumers who ask for validation should receive just that: a validation that the agency has verified the balance due has some basis as alleged. Too often consumers categorize this process as requiring "proof" as taxguy does. This is not the function of the validation process. "Proof" is something that will occur in court (or not). No document will be enough "proof" for many consumers. That is why the court system exists.

I am sure many judges would disagree with you. Courtrooms are not a playground. And judges do not like it when plaintiffs waste their time by filling frivolous lawsuits that do not have proof.

Welcome to RegulationRoom, jeffreyjon, and thanks for your comments. Some people are concerned that collectors don't do much more than doublecheck that the amount in the validation notice is what the creditor says the consumer owes. The FTC thinks the collector should have to do a “reasonable” investigation and CFPB is deciding whether this should be the new federal rule. Given your experience, we hope you will comment on the topic page, When consumers dispute a debt – How should collectors investigate and “verify” the debt.

Thank you for your debt collection stories and comments TaxGuy. As CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what you and other commenters say here. We hope you will comment on the other topic pages including, When consumers dispute a debt.

Most of the consumer debt I see if coming from debt buyers and the consumer doesn't recognize the name or the amount. Many of these are beyond the statute of limitations to file suit but suit is filed anyway. Many consumers don't know to file an answer is court and a default judgment is entered. The information you suggest would help a lot in letting consumers know what this debt is. I would include the trail of ownership of the debt as there could be intermediary owners between the original creditor and final collector. Debts are sold and resold. It would also help to have some documentation of the specific debt having been sold so the consumer can verify the current ownership of the debt. Currently, all they get in response to a validation request is "we checked and you owe it". Our firm asks for specific documents related to the claimed debt and the response we get is "the courts say we don't have to provide any documents...go fish".

Thank you for your comments and suggestions Jane freese. CFPB doesn’t have legal authority over absolutely every aspect of debt collection and rules about collection litigation are a complicated mix of state law and federal law. But as CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what you and other commenters say here. We hope you will continue to engage in the discussion, it sounds like your experience can give CFPB some important insight.

The majority of the collection disputes I help my clients with are never validated with documentation. The CRA simply sends a letter stating that the debt was verified although the dispute letter specifically asked for documentation.

Thank you for your comment, Marlene, and welcome to RegulationRoom. You mention that you've had some experience with clients having collection disputes. What information that CFPB has suggested do you think would most help your clients and why? How do you think it would change the outcome or the process of the collection disputes? Do you think that requiring debt collectors to provide additional information to the consumer could add to the confusion?

As a creditor, I can agree with this notification on medical services since most people receive bills from companies they never heard of. When it comes to auto loans, and other monthly installment loans, I am sure the consumers are aware of the debt and who it is payable to, unless sold. This could be a huge regulatory burden on creditors that don't sell loans and follow current collection laws. After all, do very many people pay monthly payment to the same people for several months and them forget they owe the debt. All laws should not apply to all creditors.

Thank you for your comment, mpick76. CFPB is interested in hearing ideas from debt collectors on how to make it easier to tell the “bad apples” from responsible collectors. Do you have specific suggestions for how CFPB could clearly differentiate between different types of creditors when writing rules for the validation notice? We hope you will join other discussions, including documentation on the topic, Making sure debt collectors & buyers have info about the debt.

If a bank or loan company makes the installment loan and does collections itself, and the debt is not sold or turned over to a collection agency, then there is no reason for a notice to the consumers to recognize the debt. They have been making payments to the debt collector for months and already know about the debt. Besides, the lender has already sent several past due statements and a certified letter about the debt.

It is important that a consumer receives notification that an account has arrived with a third party vendor. But a blanket notice covering every situation that may happen between now and the end of time should not be included in that notice.

The initial notification should include the following facts:
1. The original creditor
2. The amount of the claim
3. The last date of charge to the account

It should also include the following information:
1. If you do not recognize this obligation, please call our customer service line for additional information. Please understand that you will be expected to identify yourself before customer service would be able to provide that information. Utilize this toll-free number to reach customer service. You will not be able to speak with a debt collector on this line.

2. If you do not believe that you owe this money, contact customer service for information regarding your right to dispute a bill. This request can also be made by mail or you can find this list at CFPB.com

Finally, of course, the recovery industry can include a request for full payment of the obligation or a call to discuss resolving the matter. The bottom of the notice should include "This notice has been generated by a debt collector."

The CFPB should determine what standard information needs to be made available for verification of a debt and the collection industry should be required to provide that information when requested. The list should be standard and available on websites of the CFPB and sent by every member of the industry upon request. i believe the list should be:

1. Original Creditor account number
2. Itemized statement of obligation including amount and date of last charge and payment
3. Type of debt
4. Signed contract if debt was the result of a contract
5. Location where services or sale was initiated
6. Any other brand name/business consumer might recognize associated with the obligation (if applies)

Splitting these obligations of the recovery industry serves a positive consumer purpose as well as better serving the industry. Additionally, you will notice that I ignored the legal notification portion completely. Upon introduction is definitely the incorrect time to speak of legal action, the industry should be required to provide this notification only in cases that reach a minimum of a 50% chance that suit would be involved. This notification would have to be documented as sent no less than 45 days prior to taking any legal action.

From a creditor's standpoint, I generally agree with this comment. I think a good validation notice could answer a lot of the consumer's question. I think the author of the above note had some very well reasoned thoughts. I wouldn't go so far as to add that an itemized statement must be provided, particularly if one might not be available (perhaps because of record retention rules or because one simply may not exist), but providing information as to the type of account, brand name of the original creditor issuing the account, the account number, the date of last pay, and the name of the party from whom the debt may have been purchased would help. Providing documentation at the get go seems rather unneccessary and costly, particularly if the wording of the letter allows the consumer to readily identify the account, and the disclosures allow the consumer to request documentation for validation.

I do not communicate with anyone I owe money to by phone. I want a written trail. It's too easy for them to say I agreed to something or to give me misleading information by phone. I want it IN THE MAIL.

I don't think that the partial SSN should be included. That raises too many privacy concerns. And I'm sure that one day a debt collection company will have a "system malfunction" and will "accidentally" send the full SSN. Plus, what if it is sent the the wrong Ms. Jones. Too many consumers have similar names in the same city. Lastly, many different companies classify a partial SSN as the first 5 digits whereas other stick to the traditional last 4 digits. If a mail thief is lurking, then he might have access to a consumers full SSN.

My experience is only with medical bills. The debt collectors seem only to know (a) what hospital and (b) how much. When you've been doing the hokey-pokey from emergency room to nursing home and back again over a period of months, that information is not much help.

What's really needed is an itemized bill that's a lot clearer than the "statement of benefits" we get now. Something as clear as: "You were in X hospital on this date. You had this test and that test. They cost a gazillion dollars, but we bargained them down to $17.48. Please pay this amount."

It is unwise to require that the debt collector send sensitive personal information to the debtor (e.g., SSN, account number) as such a requirement would expose the debtor to the danger of ID theft.

Thank you for your comment. Do you have any suggestions as to what the correct balance between privacy and disclosure may be in order to identify the debt to the debtor in a safe way?

Every validation notice should include, not only the name, but the address and phone number of the current owner of the debt. It is not always the case that the consumer knows who the owner of the debt is, or how to contact them. This would not be a burden on collection agencies, because it would only require the collection agency to cut and paste the address and phone number of the debt owner onto the validation notice. The collection agency should already have this information in their company records, as the debt collector is forwarding consumer payments to said debt owner's address. This would allow the consumer to attempt to deal with the debt owner directly to try to resolve the dispute. For example, a case of mistaken identity can more easily be resolved by talking to a customer service representative of the debt owner, than by talking to a debt collector. The debt collector has no authority to correct the mistake, but a customer service representative of the debt owner does.

Every validation notice should include the collection agency's license status: license number, state of license, original license issue date, and current license expiration date.

This is not an appropriate requirement because not all states have licensing or registration for debt collectors.

They need to include the name of the original creditor as well as the account number and the brand name the consumer would recognize. Date and amount of last payment, copy of the last billing statement (supposedly) sent to the consumer. However I also think they need to send a copy of the original debt document with the consumer's signature. Someone can send me bills for something I don't owe, but they can't send me a signed paper I never signed.

But they also can't send you a signed paper for something you agreed to online, or over the phone. So few people actually put a pen to paper these days to sign a formal written agreement. So that's an unfair requirement when it doesn't always exist.

I have never applied for credit in any way other by paper application, and everyone I have ever owed money to has tons of paperwork. I don't know how it works when you apply electronically, but what's to prevent someone from saying they are owed money? The burden of proof is going to have to be on the creditor, and if they aren't getting paper signatures, they'd better have some pretty good proof otherwise. Meanwhile, if you say they wouldn't lie about it, I would love to sell you my ocean front property in Nebraska.

I think the requirement for a debt collector to send a validation notice 5 days after the initial contact is backwards. I believe communication between the debtor and debt collector would be improved if the debtor has the validation notice before the initial telephone contact. The debt collector should be required to mail the debtor a validation notice 5 days before any phone contact, not 5 days after. Otherwise, the debtor is speaking with an unknown caller, who has surprised them with a demand for money. The debtor has not been provided with any time to prepare their thoughts, or to formulate important questions about the alleged debt. They may be caught "off guard", increasing the fear and anxiety of the debtor, which would necessarily lead to impaired verbal communication. The debtor has no written factual statement to refer to during the phone call, while the debt collector has all of the factual details in from of them on their computer screen, and can cite facts and figures. This situation creates an imbalance of power not conducive to good communication. This proposal to require debt collectors to send a validation notice 5 days before the first telephone contact would impose no financial burden on the debt collector, because validation notices are already required to be sent to the debtor. It is simply a change in the timing of an already existing requirement.

Providing too much information in the first notice creates a risk of divulging sensitive personal information to the person who now lives where the actual debtor used to. I do think that providing the chain of ownership information (especially original creditor) should be provided for sold debts. When it comes to medical debts, HIPPA becomes another concern. Therefore, specific info on medical debts should only be provided AFTER the collector has verified that they are communicating with the proper party.

Information about the source of the debt (such as the date of the service) can be provided without infringing on the patient's privacy. No one should be asked to pay a debt without first being told why they owe the money. This is esp. true of medical debts, which are notoriously complex and apparently redundant, with many charges occurring on the same occasion.

In the case of medical debt, the statement should inform the consumer of the date and location of the service provided, including the name of the doctor who was in charge of the case (rather than a consultant or firm that never contacted the consumer) or the commonly used name of the location (such as a hospital or clinic) where the service was performed. In my experience, cost-conscious consumers who are wary of scams have declined to pay legitimate medical debt because they did not recognize the debt and could not get an answer to the basic question, "Why do I owe this money?" When the debt is unexplained, it is prudent to refuse to send money, yet when the debt is in fact legitimate, the consumer may suffer severe penalties for failure to pay.

A validation notice for medical debt should not simply repeat numerical codes or obscure abbreviations. It should state, "You were billed on (DATE) when you went to (PLACE)." If other debts related to the same visit have been paid, the letter should say so, e.g., "You already paid for other services during this visit, but you still owe..." Or, "Your insurance paid for some of the costs of this visit, but you still owe...."

This issue is related to the absurd complexities of medical billing, but those complexities should not be used to conceal the origin of a debt from a consumer.

Thank you for your comment muscogulus and welcome to RegulationRoom. When adopting new rules, CFPB is very interested in balancing costs and benefits. Do you think what you have proposed might burden debt collectors with significant costs that can pass down to consumers? Would an alternative, like providing the hospital name, or other information that makes it easier for collectors to produce, be acceptable?

As medical records become more digitized, I see no significant cost increase to debt collectors in passing on substantive info to debtors, although debt collectors are bound to say otherwise. My concern is that the cost to consumers of inadequate information is routinely underestimated or dismissed as trivial. Here is an example: When I worked with a non-profit in Alabama, I took part in an informational meeting on a program of federal assistance (Farmers Home Admin, IIRC) in securing access to home loans on affordable terms for low-income workers. One woman who was at the meeting spoke of having been denied access to the program because of a single blot on her credit record, namely an unpaid medical bill. She said she had not paid it because she could not determine what the charges were for, was unaware of any medical treatment she had not paid for, and could not get a straight answer from the debt collector. She decided the debt might be illegitimate and refused to pay. As a result she was excluded from access to a home loan. This is an example of a consumer on a limited income who was consistently disciplined about her finances and who should have had access to credit. I find it significant that it was a medical bill that tripped her up, placing her in a category in which even the FHA would not work with her. From this point, credit was only available to her at high cost if at all. I am confident that the rule I am suggesting would have led her to either pay the debt or dispute it formally on the basis of valid information. What it would not have done is to leave her to conclude that she was being scammed and refuse to pay at all. This anecdote (and I admit I only have anecdotal evidence) does suggest that legitimate credit agencies also stand to benefit by disclosing information that will persuade skeptical consumers that they do actually owe the debt.

Speaking from a collection standpoint, I can tell you that most collectors would LOVE to give more information on the initial Validation Notice. The problem is, the murky case law related to "overshadowing" makes it risky to include anything other than what is in the statute - no more, no less. Here's what I would like to include on the notice:
1. Name and address of the current creditor.
2. Our relationship to the current creditor.
3. Name of the original creditor, and the name of the subsequent owner of that original creditor's records, if that original creditor no longer exists (e.g. WaMu, Wachovia).
4. Any brand name or company name associated with the account.
5. The type of debt.
6. The original creditor's account number, and any other account numbers that this account may have been known under.
7. The amount of the debt (more on this in the appropriate thread).
8. The date the account was opened (for revolving credit) or the date the debt was incurred.
9. The date and amount of the last payment made by the consumer.
10. The date and amount of the last charge or debit on the account (for credit cards).
11. The name and address of any co-debtor that is also receiving this notice (helpful for co-signers).

I don't believe that any portion of the SSN should be included on this letter, because it's just too risky. However, I think the full account number can be included because in almost all circumstances, the account would already be closed and unable to be used by identity thieves.

I do think it would be a bit of an expense on the part of creditors and debt buyers to provide this information to the agencies and law firms that they outsource collections to, but I believe that it would benefit those collectors as well as consumers to have this additional information. It would be necessary to mandate that this information be included whenever creditors sell portfolios of bad debt. But it would be worth it.

My only concern about this excellent comment is that consumers not be subjected to a flood of confusing or potentially intimidating information. The most useful information is the what, when, who, and why of the original transaction that incurred the unpaid debt. The original creditor should be identified by a name known to the consumer, e.g. DR. JOHN SMITH, RHEUMATOLOGIST not DYNAMIC HEALTHCARE OF GREATER ANYTOWN d/b/a ASSOCIATED SPECIALISTS P.C. You get the idea.

Validation should be obtained from the Creditor by the Collection Agency prior to any Collection attempt is made by the Collection Agency at the very least. It would be even better if the Collection Agency would give notice of validation at least 5 days before any attempt is made to Collect.
This notice would give the Consumer a narrow window to contact the Creditor directly to satisfy a debt that may be outstanding or to inquire about the details of the alleged debt before making a good faith payment to the Collection Agency.
The rules of Evidence Judicial Procedure should be horned during the validation process. With out meeting some measure of the burden of proof all functions of Debt Collection is simply a burden to the Tax Payer, any proceedings with out court worthy documentation would be frivolous.
If Custody of the debt is transfered form a Creditor to and Collection Agency the Contract must be available for the Consumer or Custody of the debt by the Collection Agency should be invalidated.
Privacy should be respected. When it come to mortgage debt; Upon the issuance of a mortgage form a bank the bottom line banks holding do not decrease. In essence The bank has written new currency (guaranteed by the future payment of the Property taxes, and other Taxes placed on the individual Citizens of the United States of America backed by there Social Security numbers and property deeds) in to existence. Essentially the Borrower is giving the full amount of the mortgage plus interest to the mortgage lender.

If the FDIC truly backs Lenders, The lender should maintain the documentation of the agreed debt and a Default should be handled by the FDIC. Outsourcing to a Collection Agency can compromises the custody of the debt and encourages harassment of the consumer by a 3rd party.

May Fraud be Minimal and Prosperity be Abundant.

Welcome to RegulationRoom and thanks for your comment Jmonighan. You've raised several ways to further allow consumers to validate their debt. You may wish to join the discussion on the "validation notice" sent to consumers by clicking here.

Items 1 through 10 should all be provided
on the validation notice. Number 10 specifically should include the Date-of-service or DOS for the medical debt.
Many consumers do not realize that
medical debt goes to collections just like
any other consumer debt. They mistakenly believe that their insurance company will
resolve the issue. Also with extensive medical bills ( inpatient surgical stay)
consumers have professional bills from each physician ( radiology, pathology, etc)
in addition to technical component bills
for the facility. Many times the consumer never sees these medical providers and
either mistakes the bill for another aspect of the service rendered or, again, just assumes the bill/debt will "be taken care of". additionally the name of the consumer's insurance Co./plan on the validation notice would be quite helpful.
This may seem to be a great deal of extra information but the originating physician and/or facility obtain this information at the time of or prior to service.

Welcome to RegulationRoom CaliG, and thank you for your comments. Is there a way the validation notice can help clear up consumer confusion about the role of insurance companies?

It also sounds like you may have experience dealing with medical debts. If so, will you share more details with us? CFPB is looking for information on problems consumers and creditors are having in debt collection, and wants to know more about individual experiences.

I agree that expanding the scope of the validation notice would benefit consumers. Especially important is a means for the consumer to contact the original creditor and identify the account in question.

When debts are sold multiple times it becomes impossible for consumers to: (1) determine if the account is theirs; (2) validate proper assignment; and (3) determine if the statute of limitations has expired.

The current requirements facilitate "zombie debt" accounts which - although already paid by the consumer - come back to life again and again. Absent a means for consumers to identify an account there is no way for them to verify that they have previously paid that debt.

Thank you for your comment crecente. Zombie debts can also be debts that are time barred – where the owner of a debt has waited too long to bring a lawsuit to collect it. To learn more and comment on this issue, see old debts.

I believe all of the possibilities listed are necessary.

I never did business with Joe's Collection Agency and would never recognize any debt they allege is owed.

Interest and other fees would make the amounts unrecognizable either even in the event I could miraculously determine that $757.24 is an old utility bill.

Thank you for your comments JohnEllis, and welcome to RegulationRoom. Because federal law requires CFPB to balance costs and benefits in any rule it might make, the agency wants to know what information would be most useful to consumers. If requiring all the information on the left were too costly, what kinds of information do you think would be most important, either for verifying a consumer’s identity or helping the consumer recognize the debt?

The debt collector must be required to submit the original application for credit with the consumer's original signature and the original letter of approval for the credit. The debt collection company should be required to submit full documentation that the debt actually exists. Too many debt collectors rely on falsified affidavits.

Welcome to RegulationRoom batchbattery and thank you for commenting. Can you elaborate a little on what this "full documentation" would require? In what ways is the current validation notice requirement inadequate to protect consumers?

Full documentation per my previous comment - that is the original application for credit with the consumer's original signature and the original letter of approval for the credit. Additionally, statements for the credit showing purchases made with retailer information, amounts and dates. Currently, when you submit a DV to a bill collector, you get a letter back that only says, "we have verified the debt" but they generally don't show any sort of documentation to back their claim.

As a banker in a small bank, I have been on both sides of the collection business. Bankers have to prove a debt and give consumers a chance of object to the validity. When I have had collection agencys contact us for medical collections, I found these people to be scum. They don't care if the debt is valid, correct, or anything else. They just know that they get 50% of everything they collect. You can request that they not contact you again, but they will. My suggestion is that collection agencies not be allowed to call at all and all correspondence be in writing. If anyone can tell me what I owe and why I owe it, I will pay it. They can't and they don't care.

2|Info about the amount owed - 9

Agency Proposal

The validation notice is also supposed to help consumers be sure that the amount being collected is what they really owe. Just seeing the total might not be enough to figure this out, because interest and fees might have been added, even since the last billing or periodic statement to the consumer.

Here are three ways that a new federal rule might require breaking out the total amount:

Alternative 1: principal; interest; and fees and other charges. (This is what the FTC has recommended. See 2009 FTC Modernization Report).
Alternative 2: amount at date of default or charge-off; interest added after that date; fees and other charges added after that date; payments or credits received after that date.
Alternative 3: amount due on last periodic or billing statement for the account; additional balance that became due after the closing date of that statement; interest added after that date; fees or other charges added after that date; payments or credits received after that date.

  • Costs: What expense or problems would debt collectors and buyers have with giving consumers this information?
  • Benefits: For what types of debts, or in what situations, would each alternative most help consumers figure out whether the amount stated is what they really owe?

Are there other alternatives CFPB should think about? In general, is it better to use one single breakdown approach for all types of debt, or is it more useful for consumers and collectors to have the breakdown depend on type of debt?

Read what CFPB said in the ANPRM about Itemization of Total Amount of Debt.

Comments9

Commenting is now closed.

I'd believe explaining their debt in the way current legislation has revolving accounts explain debt (minimum payment required, time it would take to pay off the debt with minimum payments, how much they'd end up paying with interest and fees during that time) would be logical.

The FTC got this one right. Alternative one is easy to communicate and understand. Terms like default and charge-off can be confusing and subject to interpretation.

Alternative one is the easiest to communicate and probably the easiest to understand. Accouting systems will vary from creditor to creditor and requirements beyond this would only become more cumbersome and costly for a creditor and more confusing for a consumer.
I would not have the breakdown be different for different types of credit extended. Computers and brains all across America will start smoking.

Simplicity ought to be the guiding principle and Alternative # 2 is closest to that principle, (but expressions like "charge-off" should be avoided. That's a technical term specific to accountants. Some average consumers just aren't going to know what it means).

Beginning with the amount owed on the date of default, then adding interest (including rate) is simple enough, (still, the calculation of that interest could be included). Any and all fees ought to be listed, explained and JUSTIFIED. The same should hold true for any other charges, followed by payments and/or credits added after the date of default. This presentation would provide a clear picture.

Hi Dasein. Welcome to RegulationRoom, and thank you for joining the conversation. Do you think consumers would benefit from any additional information, such as the possibilities discussed under subtopic 1, about helping consumers recognize a debt?

Moderator:

This so-called "validation notice" might better be called a 'justification notice.' After all, the notification should supply the justification underlying the demand for payment; ("Why am I being asked to pay this money?").

This justification, obviously, should clearly specify the original transaction; i.e., specific product or service purchased, prior efforts to collect, (the history of the collection efforts) and present status. It's not so much 'additional information' which is required, it's more the clarity of the information provided.

That said, I'm convinced that communications between creditor and debtor should avoid words like 'creditor' and 'debtor,' along with words like, 'charge-off', 'default' (already mentioned by myself and emmacollector in this thread) and any and all words that belong in an accounting 101 book. I understand what these words signify and sometimes I get confused by who's the creditor and who's the debtor. Again, simplicity, which entails clarity, ought to be the guiding principle.

While Alternative 1 seems simplest, there are hidden complications. Who defines what "principal" means? With revolving credit accounts, interest accrues (as finance charges) and is rolled into the balance. So does "principal" mean only the part of the balance that was charged by the cardholder (very difficult, if not impossible, for a collector to calculate) or the total charged off amount? I understand that it can be difficult when dealing with different kinds of debts. But I don't think this option will work for a large portion of consumer debt. Alternative 2 doesn't work because who defines when a consumer "defaults" on an account? Many of us have missed a payment here or there, but we get back on track. So it's too ambiguous. That leaves Alternative 3 as the most feasible, but what about accounts that never had a periodic statement or billing statement? I propose breaking down the total amount by stating the amount owed on the last statement issued by the original creditor, or, if no statement was ever issued, the original amount of the debt when incurred, and then an itemization of all debits and credits applied since that balance.

I have a charged off loan which I have been trying to get a repay plan on but the debt is listed as one amount on my CBR and the debt collector had the balance increased by $12K more when discussing it over the phone. That is outrageous that they do not have an accurate amount of what is owed to the original lender.

Some problems that debt collectors and buyers have with giving consumers this information arises in the field of Electronic Data Interchange. Here, not all debts, especially with interest are calculated the same way, and since there are fees, such as statutory attorneys fees, and court costs, which can be added to the balance, calculating the balance becomes cumbersome when the data is transferred among Trading Partners on a daily basis because the data gets lost in translation over day-to-day lags. Computers don't think the same way people do and what we think is a simple calculation is muddled when partial payments are added and the data is transmitted between parties.

3|Info about the consumer's right to dispute the debt - 32

Agency Proposal

Now, the validation notice must tell consumers that

  • If they notify the collector in writing, within 30 days, that they dispute the debt, the collector has to send them a “verification of the debt” (or a copy of a court judgment)
  • the collector will consider the debt valid if they don’t dispute the debt in time

Collectors don’t have to use any specific language to tell consumers about their dispute rights. Do consumers generally understand their rights? Should a new federal rule create standard language and, if so, what should it be?

Consumers have several other rights, including:

  1. the collector must stop collection efforts until it verifies the debt (FDCPA § 809(b))
  2. consumers can ask that the collector stop all communications with them (FDCPA § 805(c))
  3. the collector has to communicate only with the consumer’s attorney if he/she has one (FDCPA § 805(a)(2))
  4. the collector cannot contact the consumer at inconvenient times (FDCPA § 805(a)(1)) or at his/her workplace if the employer prohibits such communications (FDCPA § 805(a)(3))

According to the FTC, few collectors now tell consumers about these rights (see the 2009 FTC Modernization Report).

Should a new federal rule require collectors to include these rights in the validation notice? How, if at all, would such information help consumers?

Would it be better for CFPB to create a separate “summary of rights” that collectors would have to send with the validation notice? Would consumers need additional information to make informed decisions? (For example, telling the collector to cease communication may prevent discussion of some new repayment plan or other compromise, and make it more likely that legal proceedings are started against the debtor.)

Related Topics:
When consumers dispute a debt
Making sure debt collectors & buyers have info about the debtLimits on communication with the consumer
Questions about phones & mobile phones in debt collection
Unlawful collection practices—Communicating with a consumer who has an attorney
Read what CFPB said in the ANPRM about Statements of Consumers’ Rights Set Forth in the FDCPA.

Comments32

Commenting is now closed.

There should be no option to attempt to verify the debt. Attempts should always be required and if verification is not made, the debt cannot be further transferred.

Hi rb. Industry certification standards of the Debt Buyers Association prohibit selling a debt with an unresolved dispute. You can tell us more about what should happen with unverified debts, here.

Whether an original creditor is selling a debt, or contracting another party to collect on their behalf - they should have liability for the actions taken to collect that debt. I has an original creditor reach out in 2004 about a debt for a former roommate. I told the creditor the person moved and I lost touch with them. Several months later the company had a collection firm send collection letters in my name. That debt in my name was sold to two separate collection firms which I had to take to court to have my credit repaired. I heard nothing about the debt until 7 years later when $10K was seized from a bank account without warning or notice. It was that same debt that was already validated as not belonging to me. I had been ensnared unfairly into the court system and a judgement rendered for failure to appear as a result of court service notice going to an address I never resided at. The original creditor who knew they debt was not belonging to me received no penalties for their original clerical error that spiraled into a battle exceeding 9 years to resolve.

Verification is a joke, it just means that they look at there computer again and say yes you owe the debt. They don't offer any proof that you owe the debt or that you are the actual person that incurred the debt. I had my identity stolen and I didn't even know it. They could not produce a signed credit card receipt to compare my signature.

A separate "summary of rights" should be sent to, and made available, to consumers. We are woefully uninformed and misinformed about our rights as consumers; what avenues of negotiation we can pursue; or even who can assist us.

Furthermore, there should be some laws on the books on when collectors cannot collect e.g. if the original creditor has not made an attempt to collect the debt for an extended period of time, I should not get a collection notice 20 years after the fact.

Thank you for your comments and suggestions, Gevian. CFPB doesn’t have legal authority over absolutely every aspect of debt collection, and rules about collection litigation are a complicated mix of state law and federal law. But as CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what you and other commenters say here. We hope you will continue to participate in the discussion.

More information to the consumer with the initial notification would be more confusing and intimidating than it already is for them. Simplifying the initial notification while including information about how to contact someone if you do not recognized this obligation is the way to go. Then the CFPB can design and require everyone to send a separate Summary of Consumer Rights to a consumer. It could also be available in the exact same form on the CFPB website and on informed professionals websites within the industry.

I would maintain the consumer's right to ask for a cease communication, but I would suggest that the CFPB would serve everyone better by including that the CFPB would suggest that the consumer may be better served by keeping this communication available except as a last resort.

This solution also bears the added advantage of making sure the public is aware of the assistance available through the CFPB.

The burden of proof should be on the creditor. If you make the debtor responsible for following up with a request, it gives the creditor an opportunity to say they never received anything from the debtor... If they had to send the documents to start with, there would not be any question.

The burden of proof cannot be placed anywhere else, JClark53. But, a disputed account is rare. Most people are aware of their obligations, but just cannot pay them now. Starting the process should be simple and clear to each party, not talk about judgments or disputes where it is unlikely that either apply.

I agree that there documentation should always be provided. Why would I pay a debt without absolute proof that it belongs to me?

When the first collection agency can't collect they sell the debt to 2nd tier collectors. They sometimes sell it to 3rd tier collectors. My experience in helping resolve collection disputes is sometimes the first collector and always the third collectors do not provide debt validation letters.

Welcome to RegulationRoom Mike Smith, and thank you for your comments. What kind of information was in the validation letters you did receive? Was there information that wasn't in the notices that would have been helpful to have? In the section below this one, CFPB asks how a standard validation notice could be helpful. Do you think a standard notice would make it more likely for collectors to send the notices?

I was not the one with debt. I was a mediator trying to help. The people with this situation sometimes ignore the first notice to them and don't ask for a validation letter. Others, I believe, do not read it carefully and see they have a small window of time to dispute the claim.

I think the original notice letter to the debtor should HIGHLIGHT the part about a validation letter. I also, think the original creditor should be required to help resolve disputes instead of debtors or third parties like me only being able to talk with the collection agency.

Probably 50% of the agencies I have dealt with do not follow existing regulations.

Without penalties they never will.

The few that are reasonable and follow the rules are a pleasure to deal with, as a third party.

Once companies have sold the debt to a collection agency they do not help resolve it in any way and the collection agency is only interested in getting money not whether the debt is real or there were some mitigating circumstances.

Sometimes the collection agencies will add extra fees to the debt which places an unfair burden then person with the debt.

The collection agencies in my experience helping resolve debt disputes will often NOT notify the credit agencies that the debt was resolved.

My experience is the collection agency will not correct the debt on the credit report! we need a law requiring the collection company to report debt repayment or debt settlement to the credit bureau in a timely manner... Say 30 days after the debt has been settled, or payment arrangements have been made.
It can be very hard to clean up your credit when working with collection companies...
they want their money but they don't care if your credit report is accurate!

Thanks for your comments, Vglass, and welcome to RegulationRoom. CFPB wants to know more about consumers' experiences with debt collection. Were you able to eventually solve this issue with the bureaus or do you still see inaccuracies in your credit report?

This proposed rulemaking is not about credit reporting. I understand that people have significant concerns about their credit reports. But that belongs in a reform of the Fair Credit Reporting Act, not the FDCPA. Inserting credit reporting rules into the FDCPA would make things difficult for debt collectors who don't report to credit reporting agencies at all.

Thanks for your comments RHN91362. You're right to point out that credit reporting is covered by the FCRA. However, this stage is an advanced notice of proposed rulemaking. Because CFPB hasn't proposed specific rules about debt collection or credit reporting yet, it's interested in learning more about the range of issues implicated in debt collection. Are there things CFPB should keep in mind about credit reporting when making new regulations for debt collection, even though credit reporting issues might still be dealt with in a separate regulation?

It is the responsibility of the creditor and debt collectors to report accurate information. Reporting accurate information has nothing to do with "debt collectors who don't report to credit reporting agencies at all." If a debt collector reported accurately that the debt in question has not been paid, but now is, it is the responsibility of that debt collector to report the newly accurate information. As I too have noticed, some debt collectors will not accurately report updated information to the credit bureaus once they are paid.

We absolutely need a cap/limit on fees and interest on past debt!

For attorney debt collectors, being required to provide a list of all the rights the consumer may have comes perilously close to the provision of legal advice; even if it doesn't cross that line, the unsophisticated debtor may believe that an attorney is acting as a neutral court officer rather than as an advocate for an adverse party. I've had debtors ask me "Do I need to come to court for this?" after I've sued them.

Thank you for noting that concern. CFPB mentions putting together a separate "summary of rights" to accompany validation notices. Would this option, accompanied by clear notice that the notice is from CFPB rather than the attorney debt collector, be a good alternative?

I think it would. I work for an attorney at a debt collection law firm and I think this would make things a lot easier and simpler.

The collector must include the rights in the validation notice

The collection agency is not required to actually validate the debt and provide information to the consumer. Example, I disputed a debt as valid. The return validation consisted of a one line sentence: "The consumer owes the debt." This is not to me or to any reasonable person validation. The collection agency should be required to at least furnish enough information to allow the consumer to recognize or dispute the debt. That information ideally would be a copy of the original application and a copy of the final billing statement.

Thanks for your input, Coterotie. CFPB is also looking for comments about what information should be in validation notices. This would help consumers recognize a debt as their debt. In your experience, and keeping the CFPB's possibilities in mind, tell us what information would be useful to consumers by commenting under the "Info that might help consumers recognize the debt" topic above.

Failure to properly validate the debt as described by furnishing final billing statement and original application would invoke the consumer's rights to have all further collection activity immediately barred and the ability of the consumer to have the debt IMMEDIATELY removed from their credit report. All too often it takes years to have false or misleading information removed from a consumer's credit report.

A credit reporting agency should be required to immediately comply with information regarding disputed debt and completely remove any reference to the debt. As an example, I am attempting to have a time barred paid lien removed from my Credit Report. 2 of the 3 bureaus immediately removed, 1 refuses to remove. I have sent documentation from the court, the original creditor, from the office of probate judge all to no avail. Without a remedy, I am left with a false item on my credit report.

The current validation notice is already too long--bordering on "boilerplate". To add more language to this would confuse or intimidate the least sophisticated debtor and/or lead them to immediately ask that the creditor cease communication. The problem with that strategy is that it forces the creditor to file suit, thereby incurring court costs that will be added to the debt. Instead, debtors should be encouraged to communicate their questions & concerns to the collector who can then (after right-party verification) openly discuss the account & quite possibly answer the debtor's question(s).

The case law related to this portion of the FDCPA has made it risky for collectors to include anything other than exactly what the FDCPA says. However, I don't think the law, as written, is easy to understand. For example - the first sentence says unless you dispute the debt, it will be considered valid ("dispute" and "valid" aren't defined), but then goes on to say what the creditor will do if you notify them in writing. So if the consumer only disputes verbally, what rights do they have, if any? I think the law should be clarified, and then I think the CFPB should create a uniform "Summary of Consumer Rights" that can be required to be included with all initial letters from collectors. That way, debt collectors don't have to worry about overshadowing and trying to fit everything onto one page, or with the tricky area of providing legal advice by interpreting the FDCPA for the consumer. Also, consumers can get a consistent message from all collectors. If there is a concern about it being separate from the initial letter from the collector, there can be a mandatory one-line disclosure providing a link to a CFPB website with that Summary of Consumer Rights.

4|Format of the notice - 13

Agency Proposal

Now, federal law doesn’t require any particular language or format for the validation notice. Collectors typically add their own information and messages to the notice, such as a demand for payment.

What else do collectors typically include beyond what federal law requires?

Many states have their own laws requiring disclosures. Do collectors typically include state disclosures in the validation notice? If so, do they typically tailor the language to consumers in each state, or do they include everything that different states require?

Has anyone developed model validation notices? How about model summaries of federal or state consumer rights? Is there any consumer testing or other research about how consumers understand these kinds of documents that CFPB should know about?

Related Topic: Questions about email, texting and social media in debt collection.
Read what CFPB said in the ANPRM about Format and Consumer Testing of Validation Notices.

Comments13

Commenting is now closed.

A standard first letter would be an excellent idea - especially if states would agree on the content. Consumers could recognize the format and know where to look for the information they need. Consumer testing would be a very good idea. I believe that industry members would favor this to reduce litigation over technical violations. Taxpayers would benefit by reduced federal court expenses.

I like the Summary of Rights idea. I think that a validation letter and even an initial communication letter should included of Summary of Rights for State Laws and Fed Laws. This would help two fold: both the debtors/consumers and the debt collecting companies. The debtor/consumers would know their rights and the collectors would then also know the particular rights for the states that they are collecting in. This shouldn't be burdensome at all since the CRA already include Summary of Rights as do employers who check credit.

Require debt collectors to send validation notices via certified mail. There must be some way to prove the debt validation notice was at least sent, if not received. I have had the experience of a debt collector not sending me a validation notice. When I made a complaint to the Illinois Department of Professional Regulations, the debt collector did not have to prove that they sent the validation notice. All the debt collector had to do was claim that they had records of sending the validation notice in their computer system. Since I did not receive the validation notice, I did not know what my rights were.

Thanks for coming to RegulationRoom and sharing your story, paperbag. Requiring debt collectors to send validation notices by certified mail may result in more people getting notices, but it would also cost more money for debt collectors. These costs may be passed on to consumers in the form of higher interest rates. With that in mind, what do others think? Would the benefits of certified mail outweigh the costs to consumers?

I would like to see the validation notice requirement become compliant and consistent with the spirit of the Americans with Disabilities Act. For example, a validation notice could have a section with a check box, asking if the debtor has a disability that is recognized by Social Security. If so, the debtor would check the box. Then there would be several lines after the check box in which the debtor could explain to the collection agency what reasonable accommodations they are requesting. The debtor could be asked to provide proof of disability, such as a Social Security award letter.

Thank you for your suggestion, paperbag. CFPB wants to hear more about consumers' experiences with debt collection. Did you or someone you know ask for accommodations because of a disability? What kinds of accommodations do you think collection agencies need to make to help consumers with disabilities?

What I had in mind when I made this comment was that some debtors are in debt because of a medical condition that has negatively impacted their ability to work. They may be on Social Security disability for this reason. Sometimes, that medical condition is scientifically known to be aggravated by stress, such as any heart condition, or an anxiety disorder. Currently, Section 806 of the FDCPA makes abuse or harassment of debtors illegal. However, what qualifies as abuse might be different for a debtor with a disabling medical condition that is sensitive to stress. My hope, and my suggestion, is that there could be some way for debtors to make collection agencies aware of the fact that the debtor has a documented medical disability, and that abusive or harassing phone calls have additional health consequences for the debtor.

Thank you for your reply, paperbag. The state of Massachusetts has a rule that only lets debt collectors call twice in a seven day time period, which you can read more about here under the subsection "Repetitive calls and robo-calls." Do you think that this would help solve the problem for people who are sensitive to stress because of medical conditions? Or are there other protections people with these medical conditions would need?

I think the Massachusetts rule is a positive step in the right direction, and would be better than the current situation. Would the two calls be defined as two connected calls, or two call attempts, whether the call is connected or not? However, for those debtors who truly cannot pay at all, due to a serious adverse life event, such as the loss of a job due to a medical disability, their situation is not likely to change from week to week. For example, most disability insurance companies only require a patient's doctor to submit a re-certification of the patient's medical disability every 3, 6, or 12 months. In essence, the debt collector would be acting as a sort of medical re-certification investigator twice a week, which is unnecessary, burdensome on both debtor and collector, and potentially harassing.

A certified letter plus a regular letter should be sent. It proves that a consumer is at least aware of the debt and has X time to respond. Should cost any more then the postage of the regular letter.

Welcome to RegulationRoom, Marine64. What other information do you think should be included in the notice?

What makes the difference on any federal law passed? The state, county, city make their own laws. That is what I have ran into and if a person does not hire a lawyer, are not a big group, there isn't much hope for the consumer. The law where everyone may hire a lawyer has limits--IE: Will not take a criminal or money cases if a non profit org. or free lawyer takes the case. I darn sure do not understand the laws etc. and I have tried to read about all this for 2 years. Of course I'm old and 100% DAV, that could be it.

Welcome to RegulationRoom, diedinnam. If you need legal help with a consumer issue, the Legal Services Corporation has good resources for veterans.

As you point out, debt collection and other consumer laws can be complicated because there are federal as well as local laws. Right now, CFPB is looking for information about what consumers have experienced in debt collection. The agency especially wants to know if veterans or current servicemembers are facing special issues that need to be addressed in future regulations.

Can you share more details with us about your experiences? Each of the topics on RegulationRoom has questions and ideas from CFPB, and we hope you will read them and let the agency know what problems consumers like you are having and how to solve them.

5|Languages other than English - 5

Agency Proposal

According the U.S. Census report on Language Use about 10 million Spanish-speaking Americans have “limited English proficiency (LEP).” The next three largest LEP language groups after Spanish (Chinese, Korean, and Vietnamese) have hundreds of thousands of members.

How often do collectors send validation notices in languages other than English?

If there were a new rule about non-English notices, when would they have to be sent:

What would be the cost to collectors?

Read what CFPB said in the ANPRM about Foreign Language Notices.

Comments5

Commenting is now closed.

The simplest way to implement a non-English notice would be to require notice in both English and the native language where:
(i) The original creditor has information about the debtor's language;
(ii) The collector obtains information about the debtor's language; *or*
(iii) The debtor lives in a ZIP code known to have a significant (5%?) number of non-English speakers.

This requirement should only apply to languages with large LEP populations - a threshold might be 100,000 - to avoid undue cost. For smaller populations, where obtaining a full translation might be uneconomical, collectors could include the following passage translated into the appropriate languages on an otherwise English letter: "This is an urgent debt collection letter. If you cannot read English, it is important that you find a translator."

I think that both an English and Spanish letter should be sent. This already happens with most legal and other important things (like voting and letters from school) in my State. But this should be a fed requirement to always include Spanish.

The collection notices should be sent in the same language of the original signed debt document.

A question that I'd ask surrounds dialects. There are numerous dialects for Spanish, French, etc. and it would be very expensive for agencies to translate every letter into every dialect of a certain language, Spanish being the most common for this type of occurrence.

What would be some recommendations from both the consumer population and those within the industry could suggest for which dialect to utilize in said letters?

In addition, would anyone believe that the potential language dialect barriers would/could lead to legal concerns? I'd greatly appreciate feedback, commentary and also recommendations on everyone's view on how to address differing language formalities.

Thank you for your comment CCompliance, and welcome to RegulationRoom. CFPB also wants to know more about current industry practice for communicating effectively with consumers who have limited English proficiency. Do other commenters have information about this?

CCompliance, we hope you’ll take a look at the other topics on our site and let CFPB know what other questions or concerns you may have about compliance issues for creditors and collectors.

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