The wild west is over for debt collectors
Richard Cordray, director of the Consumer Financial Protection Bureau, pictured with President Obama in July 2013.
The times, they are a-changin' for our friends the debt collectors. The Consumer Financial Protection Bureau, the federal consumer watchdog agency, put the industry and consumers on alert this week that by next year, there will new rules for how we get dunned. And, according to Marketplace's economics guy Chris Farrell, the agency is acting at the right time.
"The debt collection industry has been a bit of a wild west for the past couple of years, and if you look at the Federal Trade Commission -- number one complaint from consumers revolves around the debt collection industry," Farrell says.
Farrell says consumers think collectors often harass them or don’t provide proper documentation. That's problematic not just for consumers, but for the debt collection business at large.
"I think it's about time to clean up this industry, which, you know, is an important function," Farrell says. "If you borrow money, you should pay it back."
The Consumer Financial Protection Bureau is also worried that many people who are targets of debt collection agencies say they don't understand the rules, and are even unclear about where their debts came from.
"Part of what they're asking is, 'Okay, do consumers get enough alleged information about these debts?' And I think that in many cases, they don't get enough information," Farrell says.
Farrell says the tactics of debt collectors in our rapidly changing world full of new technology is also of concern to the bureau. We should expect rules governing whether debt collectors are allowed to do things like send debtors text messages or contact them on Facebook or Twitter.
From its inception, the Consumer Financial Protection Bureau has been a source of great controversy. Critics say the bureau is too powerful, and not accountable enough to Congress. Big banks have been among the bureau's biggest foes, but Farrell says we shouldn't expect too much pushback from them this time around.
"I think the banks actually, to a large extent are going to welcome this kind of rule making because some of the tactics that they've used in recent years... it's really backfired on them."