Have you ever gotten a scary phone call about an unpaid bill?
The odds are good (well, bad): One in three American consumers has been contacted by debt collectors or creditors in the last year, according to a study by the Consumer Financial Protection Bureau, which suggested new guidelines Thursday to thwart abusive debt collection tactics.
Specifically, the CFPB is proposing rules to stop collectors from hassling people too frequently, and about already-paid debts, too-old debt and debts that aren't even theirs. The protection bureau also wants to prevent collection agencies from harassing surviving relatives about deceased people's debts mere weeks after their deaths.
Releasing the proposal Thursday morning, the bureau said it will discuss the new rules during a hearing in California viewable via livestreaming at 2 p.m. Eastern. CFPB director Richard Cordray explained the changes in a prepared statement released early Thursday morning:
Companies should not collect debt that is not owed. They should have more reliable information about the debt before they try to collect. They would have to limit the number of attempts to make contact and should give consumers better information and more control over the process. Collectors also would have to make it easier for consumers to pursue disputes, and they would be barred from collecting on disputed debt that lacks proper documentation.
Many of the proposed changes are aimed at bringing more accountability to the process.
Debt collectors are by far the biggest source of complaints to the CFPB, and 40% of consumers making complaints in this category say they don't even owe the debts for which they're being targeted, according to the report.
Agencies are known to resort to emotional manipulation and may even try to squeeze money out of possible victims of identity theft.
In June, comedian John Oliver highlighted the issue in a segment about the $436 billion in consumer debt that's at least 90 days overdue. At the end of the piece, Oliver announced he had bought (and forgiven) nearly $15 million in medical debt, demonstrating just how easy it is for third parties to buy debt.
As Oliver explained in the segment, people often don't realize that their credit, automotive and medical debt can be bought and sold.
Stronger regulations have already made a difference in places like New York and California, which have passed state regulations to control the industry, the New York Times reported. But Congress hasn't overhauled federal rules on the subject since 1977.
Even the debt-recovery industry acknowledges there is a problem.
"Of course the industry wants clarity. The question becomes what do the rules say?" Joann Needleman, a former president of the National Creditors Bar Association, told the Wall Street Journal.
One big issue is insufficient documentation: Many debt collectors aggressively follow up with borrowers despite not having the necessary paperwork. Credit card companies have even been found filing lawsuits based on incomplete or false paperwork.
The new CFPB rules would specifically target third-party debt collectors, as opposed to the actual credit card companies and lenders with which most consumers are most familiar; the group said it will address first-party debt collection separately.
If you're having trouble with a debt collection agency, you can submit a complaint to the CFPB.