Debt collecting is an age-old business but it may soon receive a 21st-century revamp when the Consumer Financial Protection Bureau, an agency created in the wake of the financial crisis to protect consumers, proposes new rules for the industry. Among the changes may be whether debt collectors can text and email borrowers as they pursue overdue funds.
The idea of debt collectors adding new methods of communication to their arsenal may stir annoyance, if not fear, among some consumers. After all, the debt-collection industry isn't exactly beloved among consumers, with the CFPB recording 84,500 complaints about debt collection in 2017, making it one of the most complained-about financial services.
Debt collection is a big business in the U.S., a $10.9 billion industry that employs almost 120,000 workers who help track down overdue payments. Since the financial crisis, American consumers have taken on more debt, and some delinquencies, such as for auto loans, have been increasing. Against this backdrop is a CFPB that critics say has lost its appetite for going after financial abuses by corporations under Trump administration appointees who favor less regulation.
Fair Debt Collection Practices Act
Some consumer advocates say they worry updated rules for debt collectors may lead to an unwelcome flurry of texts, emails and calls to consumers who owe money.
"I'm really terrified the rule will say, 'Now you can contact them 10 times a day," every debt collector will max out on it," said Linda Jun, senior policy counsel at Americans for Financial Reform, a nonprofit group formed after the financial crisis to advocate for Wall Street regulation.
For its part, the CFPB argues the law that oversees debt collections -- the Fair Debt Collection Practices Act -- is long overdue for an update. The law was passed in 1977 and hasn't been updated to reflect new technologies like email and texting, said CFPB director Kathleen Kraninger in a Wednesday speech.
"This was the same year that Steve Jobs introduced the world to the idea of a personal computer with the design of the Apple II," Kraninger said. "Phone booths were on almost every corner and cell phones were not even imaginable."
Debt collectors: Just a "nudge" via text or email
Right now, debt collectors don't typically rely on texting or emailing to reach consumers because the law is unclear, said Mark Neeb, the CEO of the Association of Credit and Collection Professionals, the trade group for the debt collection industry.
"It's not illegal but it's fraught with a lot of potential pitfalls," he said. "The rules aren't clear because there just aren't any."
Permitting texting and emailing may improve the consumers' experience with debt collectors, Neeb said. Consumers will have more control over how they are contacted, he said, adding that debt collectors could send a "nudge" via text or email to repay a bill.
"Debt collectors aren't looking to deluge consumers with communications," he said.
But there's another reason why the debt-collection industry is pushing for a regulatory green light to text and email: Smartphone-addicted millennials are more likely to text than answer or place a call. "Phone communication is going to be less and less prevalent" as younger generations come of age, Neeb noted.
He added, "While they may not be dancing in the streets because they are getting contacted by debt collectors, their credit is at stake."