By Emily Stephenson
WASHINGTON Nov 6 Debt collectors using text
messages and social media to pursue delinquent borrowers could
come under new scrutiny as the U.S. consumer financial watchdog
considers new rules as part of a crackdown on the collection
The Consumer Financial Protection Bureau said on Wednesday
that before it formally proposes any rules, it wants to hear how
collectors verify borrowers' information and contact consumers.
Among questions it is asking consumers, banks and the
collection industry is whether there could be privacy concerns
or other harm from communicating with debt collectors via text
message, social media or other Internet-based tools.
In recent months, regulators have warned debt collectors
against misleading borrowers. "Now it is time to look closely at
how we can improve and modernize existing measures that were
written before the Internet, before social media, and before
many other new communication technologies," said Richard
Cordray, the bureau's director.
"We are seeking to hear from the public...about what works
and what does not in the current debt collection market," he
The 2010 Dodd-Frank law created consumer bureau and charged
it with overseeing credit cards, mortgages and other consumer
Consumer groups have pressed the bureau to crack down on
collectors to ensure they do not harass people and to require
more documentation so collectors call the right borrowers.
Mark Schiffman, a spokesman for ACA International, a trade
group for third-party collectors, said his members want clarity
on whether and how they should use new communication methods.
For instance, debt collectors cannot disclose debts except,
in some cases, to a borrower's spouse or attorney. But it might
be difficult to confirm that only the intended borrower hears a
cell phone voicemail or sees an email or Facebook
"The world communicates a whole lot differently today,"
Schiffman said. He said his group tells members that using
public sources such as LinkedIn or Facebook to find information
is fair game.
"You're going at your own risk if you go any further," he
About one in 10 Americans came out of the 2007-2009
financial crisis with some debt in collection, the bureau said.
Besides banks seeking repayment, debt collectors include
third-party collectors. Some of these charge lenders a fee to
recover money from delinquent borrowers, while others buy the
debt and keep whatever they can recover.
The consumer bureau began supervising larger debt collectors
this year. It has warned that it will crack down on collectors
who mislead consumers, which is illegal under the Fair Debt
Collection Practices Act.
Regulators levied a record fine in July on Expert Global
Solutions, the world's largest debt collection agency,
for harassing people who owed money.
Other big collectors include Encore Capital Group Inc
and Asset Acceptance Capital Corp.
Consumer bureau staff members did not give a timeline for
when they might propose rules. They said they would probably
convene a small business panel to discuss potential rules first.
They said parts of the debt collection law have only been
applied to third-party collectors so far. New rules could expand
borrower protections to cover banks that try to collect debts
themselves, the officials said.
The bureau began this summer accepting complaints from
borrowers about their treatment by debt collectors and will add
those comments to a database on its website, Cordray said.
The database also includes complaints about mortgages,
credit cards and student loans. On Wednesday, the bureau
announced that it would begin taking complaints about payday
lenders as well.
Cordray said regulators also want to make sure borrowers get
clear information about debts that are being collected and to
hear how outside collectors ensure they pursue the right
consumer for the correct amount of money.
Jack Tracey, executive director of the National Automotive
Finance Association, said that while it is too soon to tell what
the rules will say, consumers could see higher borrowing costs
if the changes mean higher administrative costs for debt
"The industry is in a holding pattern" until the rules come
out, Tracey said.
Consumers, creditors, debt collectors and others will have
90 days to submit information about the industry.