“The NBCSL resolution affirms the need for strong consumer protections at the state and federal level. This is critically important as abusive debt collection practices frequently target not only African-American communities, but seniors and military families as well.”
In calling for state legislatures to adopt initiatives requiring more detailed and accurate information and documentation in debt collection actions, the resolution also notes and supports CFPB’s efforts to promulgate a federal rule to address debt collection abuses.
Consumer advocates agree—a call for continued and coordinated support from both states and federal regulators is needed before consumers can find financial relief.
“States should continue to strengthen the rules and laws for debt collection to better protect consumers,” said Lisa Stifler, Deputy Director of State Policy with the Center for Responsible Lending. “Too often we’ve seen debt collectors file lawsuits in state courts against the wrong person or for a debt not owed. State legislatures and courts must stop this abusive financial practice by holding debt collectors accountable for initiating unwarranted legal actions.”
The need for reforms is supported by a recently-released CFPB report on consumer experiences with debt collection. The report, based on a survey explored a range of issues such as frequency of contact, lawsuits, and the accuracy or inaccuracy of claims. Prominent among survey findings:
•About 75 percent of consumers sued do not go to the court hearing, which generally makes them responsible for the debt;
•53 percent of consumers reported receiving collection attempts that were incorrect because the debt was not theirs, was the wrong amount, or was owed by a family member;
•More than 40 percent of non-White consumers reported being contacted about a debt in collection, while only 29 percent of White consumers reported having the same experience.
“Some debt collectors care only about squeezing as much as they can from the names on their lists,” said CFPB Director Richard Cordray. “The typical collector is paid on commission and may have only a passing relationship with the debtor. Some make the calculation that their chances of being called to account later are remote. But the urgent impetus to secure immediate payment is ever present.”
“The Bureau’s survey demonstrates the urgent need for a strong federal rule on debt collection,” said Melissa Stegman, a CRL Senior Policy Counsel. “We commend the CFPB for exploring this important topic in depth and look forward to the Bureau proposing a strong rule that frees consumers from abusive debt collection practices,” concluded Stegman.
(Charlene Crowell is the communications deputy director with the Center for Responsible Lending. She can be reached at charlene.crowell@responsiblelending.org.)
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