Debt collectors now have more ways to contact borrowers about unpaid debts.
The Consumer Financial Protection Bureau's new Debt Collection Rule allows third-party debt collectors to message people on social media platforms such as Facebook, Twitter and Instagram in an attempt to collect a debt.
The update also clarifies rules for other electronic communication, including emails and texts. With fewer Americans having landline telephones, texting and email have become more common ways of communicating with friends or family. The debt collection industry has long used email and texting to reach borrowers, but the industry says it was operating in a legal gray area. It isn’t illegal for a debt collector to text or email you presently, it just wasn’t as clearly defined as the rules for phone calls or letters.
Kathleen L. Kraninger, the former CFPB director who oversaw the rule changes, said in a blog post last year that the updates were necessary to modernize the Fair Debt Collection Practices Act, which is more than four decades old.
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"We are finally leaving 1977 behind and developing a debt collection system that works for consumers and industry in the modern world," she said.
Under the new rules, which went into effect on Tuesday, third-party debt collectors would only be able to call a delinquent borrower seven times within a seven-day period — previously they could call as often as they wanted. And once they reach a borrower by phone, they’ll have to leave them alone for at least a week.
The CFPB did not place a cap on the number of texts or emails a collector could send, but their messages must include information on a way to opt-out of receiving additional communication.
The rules governing how a debt collector can contact a borrower on social media has strict guidelines:
- Their message must be private and not viewable by the general public or by your friends, contacts or followers.
- If a debt collector attempts to send you a private message requesting to add you as a friend or contact, the debt collector must identify themself as a debt collector.
- They must also provide you, in each message, a simple way to opt out of receiving further communications from them on that social media platform.
The rule also clarifies that before a collector can report a defaulted debt to a credit rating agency, they must either speak to the borrower in person, by telephone or wait at least 14 days after sending a letter or electronic communication — including social media message — before proceeding with reporting.
Still, consumer advocacy groups argue the guidelines may not be enough to protect vulnerable families from harassing debt collection practices.
For one, the call limits are “per account,” meaning collectors could call a person with eight delinquent accounts up to 56 times per week. Debt collectors also don't need a consumer's permission to reach out via social media, and the rule doesn't limit the number of messages they can send unless they opt out.
“The CFPB indicated that it can still revisit the rules in the future, and we urge them to do so,” said April Kuehnhoff, a staff attorney at the National Consumer Law Center. “In the meantime, we call on states to enact additional protections to prevent vulnerable families still recovering from the pandemic from harassing and abusive debt collection practices.”
The CFPB received more than 80,000 complaints about debt collectors last year, according to The Associated Press, and the industry typically ranks high in complaints to other federal and state agencies like the Federal Trade Commission. The rules proposed by the CFPB impact only what’s known as the third-party debt collection industry - those who typically buy old debts at pennies on the dollar or are contracted by another lender like a bank to collect on an old debt.
Roughly 25 million Americans have debts in collections, according to the Federal Reserve. However, the Urban Institute estimates the debt collection rule will impact at least 68 million people.