WASHINGTON–The National Consumer Law Center and several other consumer groups are expressing “disappointment” in the Consumer Financial Protection Bureau’s second part to its final debt collection rule.
The rule, which CUToday.info reported here, does not go far enough to provide “needed consumer protections on key issues,” said the National Consumer Law Center, which was joined by Americans for Financial Reform Education Fund, the Consumer Federation of America, and the National Association of Consumer Advocates in its statement.
The groups are urging the Biden Administration to revisit the rule and strengthen protections for consumers and to further offer emergency relief on collection issues to help struggling families.
According to the organizations, the debt collection rule will impact at least 68 million people in the United States. They further pointed to research by the Urban Institute which has documented that, even before the COVID-19 pandemic, 31% of adults in the United States with credit reports have debt in collection. That number goes up to 42% for those residing in communities of color.
“The portion of the rule finalized today is focused on consumer disclosures,” the groups said. “The rules made some improvements for consumers but fell short on many protections consumers desperately need.”
Among the examples cited by the consumer groups:
Time-Barred (“Zombie”) Debt Collection
The groups noted the final rule prohibits suing and threatening to sue on time-barred debt. In an improvement from the draft proposal, the rule holds collectors to the Fair Debt Collection Practice Act’s strict liability standard and abandons the weaker “know or should know” standard that the CFPB previously proposed.
“The Bureau also opted not to finalize time-barred debt disclosures that showed high rates of non-comprehension by consumer testers,” the groups said. “However, the rules fall short of the needed prohibition on the collection of time-barred debt, leaving debt collectors free to pursue collection of debts beyond the statute of limitations. The rule also permits such collection activities without including the prohibition against filing lawsuits on debts after consumers inadvertently revive a time-barred debt with a small payment or acknowledgment, which was in the 2016 outline of proposals.”
Language Access
The final rule allows debt collectors to provide translated validation notices to consumers, but it does not require collectors to provide translations, or even to require a short statement in Spanish explaining what the document is, the groups said.
“The Bureau has also failed to provide translation of the model validation notice into the languages most commonly spoken by consumers with limited English proficiency.”
Validation Notices
The consumer groups noted the CFPB has expanded the amount of information that must be provided to consumers in the initial validation notice and created a model validation notice for consumers. “Unfortunately, the notice adopted is still likely to be confusing to many consumers and needs further testing and improvements,” the organizations said.
Parking Debts
The final rule includes a prohibition on parking debts on a consumer’s credit report without first providing notice of the alleged debt to the consumer.
“However, new communication rules from the first part of the final debt collection rules raise concerns about consumers missing such notices, especially if sent electronically without the consumer’s consent,” the groups stated.
‘Not Far Enough’
“While there are some wins for consumers, the final rules do not go far enough to provide the protections that struggling families need in the current economic crisis, including Black and Latinx consumers who are disproportionately impacted by debt collection,” said National Consumer Law Center attorney April Kuehnhoff.
“This two-part rule doesn’t do enough to protect consumers, added Rachel Gittleman, financial services outreach manager with the Consumer Federation of America. “We are in the midst of a global pandemic with vast financial implications for American families. Consumers are in desperate need of more protections, and this rule simply falls short. More protections are needed to adequately protect consumers during this crisis.”