United States: CFPB Proposes "Drastic Overhaul" Of Debt Collection

On July 28, 2016, the Consumer Financial Protection Bureau ("CFPB") released an outline of proposals that it is considering to, in Director Richard Cordray's words, "drastically overhaul the debt collection market" (the "Proposals"). The CFPB is unveiling key provisions of the Proposals for presentation to a Small Business Regulatory Enforcement Fairness Act ("SBREFA") panel, a crucial step toward publication of a proposed rule. The Proposals are limited to third party debt collectors, debt buyers and others ("collectors") subject to the Fair Debt Collection Practices Act (the "FDCPA"). The CFPB warns, however, that it plans to address issues involving first-party debt collectors and creditors on a separate track as part of its overhaul of the debt collection marketplace. Moreover, the Proposals' demand for collectors to conduct extensive substantiation and documentation of debt at multiple steps in the collection process would translate to corresponding demands and costs in transactions between creditors, debt buyers and collectors as well.

Indeed, we already have seen a preview in the CFPB's enforcement actions - often alleging unfair, deceptive or abusive acts and practices ("UDAAPs") - against creditors, debt buyers, and collectors, through which it has pushed for verification of the accuracy of account information before a debt is placed with a collector or sold, mandates for disclosure if a debt is beyond the statute of limitations, and increased steps to substantiate account data before filing a collections suit. The Proposals would incorporate even more extensive mandates of the same kind into industry rules, add enhanced disclosures and processes for consumers to dispute the debt, and impose limits on consumer contacts.

Key provisions of the Proposals would require collectors to:

  • Substantiate a debt, including obtaining a representation from the current owner of the debt that the account information is accurate;
  • Provide an enhanced validation notice and statement of rights to debtors, notifying them that they have the right to dispute a debt and that a collector cannot sue on a debt that is outside the statute of limitations; and provide a "tear off" form that consumers can fill out and return to either pay or dispute a debt (although consumers also can dispute the debt verbally at any time);
  • If a consumer disputes a debt, cease collection until the collector has checked the necessary documentation and, if the consumer sends the tear-off sheet or any written notice within 30 days of the initial collection notice, give the consumer a written debt report substantiating the debt;
  • Continually monitor portfolios after commencing collection efforts and stop collections until it has resolved "warning signs" of inaccuracy, such as a high percentage of consumers disputing their debts or the inability to obtain documentation or data after a consumer disputes a debt;
  • Obtain "reasonable support" of claims that a consumer owes a debt before filing suit, and provide a specific disclosure of the collector's intent to sue.

In addition, collectors would have to limit communications with debtors, including:

  • In instances where a collector does not have confirmed contact with a debtor, making no more than six attempts at contact per week;
  • If a collector does have confirmed contact with a debtor, making no more than three attempts at contact per week (and only engaging in one live communication with the debtor per week);
  • Not engaging in any third party contacts if the collector has confirmed contact with the debtor; and
  • Not communicating with a debtor through a work e-mail address without consent, nor through other means to which the debtor objects.

Focusing on the transfer of debts, the Proposals also would (1) prohibit successor collectors from collecting a debt that is in dispute, and (2) outline information that collectors would have to share when they transfer the debts so that debtors would not have to resubmit their information.

The CFPB is still at a fairly early stage of the rulemaking process. It must consider the report that will be prepared by the SBREFA panel before drafting and publishing a proposed rule for notice and comment. Any proposed rule is likely still several months from publication. For comparison, the CFPB convened a SBREFA panel to consider its arbitration proposals in October 2015, but did not publish its proposed arbitration rule until May 2016. Moreover, given the large number of comments the CFPB received after publishing its advance notice of proposed rulemaking on debt collection in November 2013, it is likely to receive a high volume of comments on any proposed rule, which it will have to review prior to publishing a final rule.

To influence the course of this rulemaking, both collectors and creditors should review their operations, including their policies and procedures for substantiating the accuracy of account information and responding to consumer disputes and complaints, and document the efficiencies of the current framework as well as the demands of compliance with the CFPB's Proposals. Such a review will facilitate identification of the areas where they should focus their advocacy for changes to the Proposals. Creditors and collectors also should assess the economic impact of the Proposals and the policy changes they may implement if the Proposals are adopted, for the purpose of data gathering for the rulemaking. For example, the CFPB's proposals to limit the number of allowed communications with debtors may prompt collectors to file suit regarding delinquent debt more quickly than they do now, contrary to the CFPB's stated goal of reducing collections litigation. If so, data or studies documenting the increased likelihood of litigation regarding certain debts may cause the CFPB to reconsider its Proposals or, if it does not reconsider, demonstrate the flaws in its cost-benefit analysis. Such analysis and data-gathering will be crucial both to make industry's case in the rulemaking and to facilitate development of an efficient and effective compliance strategy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.