Working with third-party debt collectors can be confusing and scary. For the more than 68 million U.S. adults with debt in collections, knowing their legal rights is crucial.
The Fair Debt Collection Practices Act covers third-party debt collectors – those who buy a delinquent debt from an original creditor, like a credit card company. An update to the rules on how the act is applied, announced by the Consumer Financial Protection Bureau in late October, alters the terms of engagement.
Some changes will modernize the law and clarify how it’s enacted. But consumer advocates say other revisions don’t go far enough or could have unintended consequences.
Know your rights
The FDCPA offers several protections, including:
Limits on debt collector actions: Collectors must be truthful, including about details of the debt. They cannot use abusive language, call repeatedly in a harassing manner or threaten violence.
Collectors can’t ask for a post-dated check for them to cash later, which is a tactic to get consumers to pay debts they cannot afford.
They also cannot collect more than the amount owed or threaten to take property when that’s not allowed.
Information disclosures: Debt collectors must send consumers a “debt validation letter” outlining important details, including the amount owed, the collection agency’s name and how consumers can dispute the debt.
Consumer rights: People can limit how and when a collector contacts them, including telling them to stop communicating altogether. In all but limited circumstances, the collector must honor that request.
If consumers doubt the details of a debt, they can send the collector a debt verification letter seeking more information beyond the validation letter.
Updated FDCPA rules
Here are some of the changes, which are set to take effect in fall 2021:
New communication options: Debt collectors will be able to contact consumers by email, text message and social media messages. The messages must explain how the consumer can restrict contact by these methods or request no communication.
Notably, debt collectors don’t need consumers’ permission before contacting them on these new channels.
Consumer advocates worry that collectors may send crucial information like the debt validation letter to email or social media accounts that aren’t in use.
“What consumers should know is it’s going to be really important for them to be proactive to opt out if they don’t want to receive communications through text message or email,” says April Kuehnhoff, staff attorney at the National Consumer Law Center.
She also notes, “If consumers start getting communications from a debt collector and you haven’t gotten the initial notice about the debt, they should ask for that information.”
New Limits on collectors’ actions: Additional changes are expected to be announced by the CFPB in December. Those will govern when collectors can add information to consumer credit reports and disclosures about debts, such as whether they’re past the statute of limitations, which vary by state and limit how long a collector can sue a consumer for payment.
Why consumer advocates are concerned, and what you can do: Some advocates worry that the updates don’t go far enough and say some of the changes could actually lessen consumer protections. Here are two of the primary concerns:
Frequency of communication: The update clarifies the definition of a “harassing” frequency of phone calls from collectors – but this also might enable such harassment, advocates warn.
The new rule limits collectors to calling no more than seven times a week per account. It bars calls within seven days after having a conversation with a consumer. But consumers may have multiple accounts in collections, leading to a barrage of calls.
The one contact per day doesn’t cover text, email or social media channels, so consumers may be inundated with messages. The new rules also allow for “limited-content messages,” which could mean a proliferation of voicemails that don’t count as “communications.”
“We have concerns about what this is going to mean especially for consumers who might, for example, have multiple medical debts in collections,” Kuehnhoff says.
What you can do: If you feel you’re being contacted too frequently, you can demand the collector cease communication in all but a few instances, such as when legal action is threatened. This extends to prohibiting communication in different channels.
No effect on original creditors
The kicker with the FDCPA is that it only regulates third-party debt collectors – that is, a collector who doesn’t represent the original creditor. A collector who works directly for an original creditor isn’t held to these standards.
What you can do: Work to quickly resolve an account when contacted by a debt collector – no matter whom they represent. You may be able to work out a payment plan or settle for less than originally owed.
Submit a complaint
If your rights have been violated by a debt collector, file a complaint with the Federal Trade Commission.
Dan Dwyer, staff attorney at the Federal Trade Commission, says consumers should provide as much identifying information about the collector as possible.
“Then, just tell us what the problem is as clearly as you can,” he says.
Sean Pyles is a writer at NerdWallet. Email: spyles@nerdwallet.com. Twitter: @SeanPyles.