By Ilan Fuchs, Ph.D.
Faculty Member, Legal Studies
Debt in the U.S. is a way of life, and debt collection is a big part of it. When debts are not paid, debt collection agencies attempt to collect the debt as agents of the creditor.
These debt collection agencies are not law enforcement agencies; they do not have any legal powers. What they do have, however, is a written agreement that allows them to demand the debt’s repayment as agents of the creditor.
If the debtor refuses to pay, the collection agencies can file suit and/or inform the three credit reporting bureaus – Experian, TransUnion and Equifax – of the debt. That will have an immediate and unwelcome effect on the debtor’s credit score.
The Fair Debt Collection Practices Act and Regulation F
Interaction with debt collectors is a naturally tenuous situation; many years ago, Congress passed a comprehensive statute controlling the methods that debt collectors use in their interactions with creditors. The Fair Debt Collection Practices Act (FDCPA) dictates what collectors can say and do and how they can communicate with debtors.
Obviously, this act changes as technology and culture change. That is why the Federal Consumer Protection Bureau (FCPB) issued a series of regulations that provide best practices to debt collectors and protect them from litigation.
However, some rules and protections in the FDCPA were not outlined clearly or did not reference modern technology. That is what the changes to Regulation F will fix.
Traditionally, debt collection calls can be placed between 8 a.m. to 9 p.m. if they are not initiated by the debtor. If there is an attorney dealing with the debt, then the debtor should not be contacted.
Also, debt collection calls cannot be made to the debtor’s place of employment if the debt collector knows that the employer prohibits personal calls. The takeaway for debtors is to tell debt collectors that you cannot take personal calls at work.
Regulation F’s Changes
In regard to Regulation F, consumers need to be aware of several important changes to effectively exercise their rights.
The first and most immediate change is the frequency of communication. One new rule specifies that there should not be more than seven attempts at communication between a debt collection agency and a debtor in a period of seven days. As long as there is no busy signal or a disconnected message is played to the debt collector, that attempt to contact a debtor counts toward the seven attempts in the seven-day period.
If you initiate a call to a debt collection agency as a consumer, that does not count towards the seven-call limit. However, it is important to remember that agency/debtor communication is not only phone calls; text or email also count as communication.
The changes to Regulation F have a clarification of cease-and-desist requests. Consumers can demand that a debt collection agency not contact them anymore. While that tactic will stop the unwanted communication, the debt collection agency can still file suit and report the debt to the credit bureaus.
The new rules also clarify how email addresses can be used by debt collectors. Debt collectors need prior consent from debtors to send emails, and these emails must advise debtors that they can opt out at any time. Text messages also require prior consent from debtors, and consumers must have an easy option to opt out at any given time.
In addition, the changes to Regulation F describe what information needs to be in the notice that a consumer gets regarding the debt. They also prohibit notifying a credit reporting bureau of the debt before notifying the debtor.
Is Limited Communication with a Debt Collector a Good Idea?
You might think that telling a debt collector that you know your rights and want to cease all communication is a win. But it is wise to remember that even if debt collectors do not call you, they still have other options such as filing a lawsuit and making a report to a credit bureau.
However, a lawsuit will cost you money. Also, think of your credit record. Remember that information on your official credit report does not disappear for many years.
Even if you do not get sued regarding the debt, once the information is reported to even one of the three credit reporting bureaus, that information is there for any financial institution to see any time you want a loan such as a mortgage. Do you really want an abysmally low credit score that will make a loan impossible or at best, very expensive?
Negotiating with debt collectors is always a better option. Agents of the creditor have the authority to settle the account, so try to do that. Tell them that you need a payment plan and try to work off the debt over time, making it a win-win situation. If you are making such a deal, get it in writing.
The fact that so many Americans are living in debt is a problem. Our culture of consumerism has many serious effects not only on our national economy, but also our culture and values.
The debt collection industry is an outcome of this consumerist culture. But the solution is in the hands of individual consumers, who can rethink their financial behavior and change their budgets.