Daddy, Make the Bad Man Go Away

How Shall the CFPB Proceed?

First, let’s take a look at where current regulation falls short. The problem of—let’s call it “overly aggressive”—collection tactics was dealt with by Congress back in 1977 with the passage of the federal Fair Debt Collection Practices Act, which is administered by the FTC. Over the course of the last 34 years, however, many things have changed. Firstly, the debt collection business has grown geometrically and is insanely lucrative thanks to a parade of recessions, and perhaps more importantly, due to the fact that the government itself began selling off large packages of bad debts in the early 1990s through the Resolution Trust Corporation—a big business indeed. Secondly, new technologies have enabled potentially abusive tactics, like robo-calling, that could not have been anticipated in 1977. And finally, the increasingly obvious weaknesses of the federal law got the states into the act, and thus nearly every state has a different law on the books purporting to protect consumers from collection abuse. The principal federal law in this area is the Federal Trade Commission Act—of 1914. You read that right—1914.

The FTC is a good agency in many ways, but it was established to do the “trust-busting” work of the Wilson administration. You really think an agency that needs to approve a merger between Exxon and Mobil can really help when your 13-year-old daughter gets that call? Here is what I believe the CFPB needs to do:

1. Consolidate Regulatory Authority

Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has broad power to create and enforce rules regarding collection practices, and in theory at least, will be far more capable of doing so than the beleaguered FTC. All federal regulatory authority must be consolidated within the CFPB, with the FTC having concurrent jurisdiction only for large scale frauds operating across many state lines, and even then only when the CFPB asks for help. Furthermore, the new Bureau must coordinate with any state agency active in the area, perhaps by suggesting uniform state regulation, and uniform intergovernmental procedures.

2. Set Clear and Simple Rules

It is an absolute necessity that we have a simple set of regulations that must be followed nationwide by EVERYONE who attempts to collect a debt as well as uniform enforcement and strict penalties for those who would violate those regulations. Right now, state and federal penalties for abusive collection practices vary widely; in some jurisdictions, a small fine—small enough to be disregarded by profitable agencies and high earning individual collectors—is the only available sanction.

[Article: Getting Collection Calls For Someone Else? Here’s What To Do]

3. Focus on Education

The CFPB has a mandate to educate consumers about their rights and remedies in the collection area, as well as many others. I believe that reforming, modernizing, unifying and publicizing rules that protect debtors from unreasonable collection tactics are among the Bureau’s most important tasks. No matter how competent any regulatory organization may be, no one is capable of protecting you better than you… as long as you know your rights. (I believe everyone should read “Debt Collection Answers” by Credit.com expert Gerri Detweiler and Mary Reed—though worth its weight in gold, it’s priced as if it were paper.)

4. Prosecute the Law Breakers

The CFPB will no doubt come across countless debt collectors and scammers posing as debt collectors who may be guilty of brazenly breaking the law. The CFPB must have a close working relationship with the Department of Justice to ensure that these people are brought to justice. For example, the proliferation of overdue debt and the concomitant growth in the debt collection industry has spawned a truly vicious new kind of scam which exploits the fear and confusion of many Americans who are at the moment financially weakened. In 2009, the Better Business Bureau put out an emergency alert warning people about debt collectors who were harassing people who had no bad debt as part of an identity theft scheme. The reason that these attacks work is because the criminal is already in possession of enough information about the alleged “debtor” so as to terrify the target on the other end of the phone. No agency of any government is today equipped to assuage this problem; only a highly directed, broadly empowered, fully fanged and funded Consumer Financial Protection Bureau can handle this one.

[Resource: Get your free Credit Report Card]

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