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Federal fair debt collection rules, part 1: role of the CFPB

Many Americans have heard of Fair Debt Collection Practices Act (FDCPA). This important federal law regulating debt collection has been around since the Carter administration.

Considering the widespread social and technological changes in American society since the law's passage, it is no wonder that federal regulators are considering updates to the rules used to implement the FDCPA.

In this two-part post, we will discuss the role of a new federal agency, the Consumer Financial Protection Bureau in proposing such updates. We will also take note of some of the changes in the debt-collection industry since the FDCPA was passed.

When Congress first past the FDCPA to address the problem of abusive debt-collection tactics, there was no federal agency specifically designated to enforcement. Instead, enforcement responsibility fell largely to the Federal Trade Commission, which also had other duties besides overseeing debt collection.

A few years ago, however, in the wake of the financial crisis, Congress passed the Dodd-Frank Act. Dodd-Frank specifically granted regulatory to the Consumer Financial Protection Bureau (CFPB) to implement rules to enforce the FDCPA.

The CFPB has a clear mandate, then, to make rules to regulate debt-collection actions that are deceptive, abusive or otherwise unfair.

And given the changes in society and the debt-collection industry since the FDCPA was passed in 1977, the CFPB has a lot to consider as it goes about the process of making rules affecting debt-collection practice.

The biggest overall change in the collection landscape since 1977 is probably the consolidation of debt collection into a more highly structured industry. Packages of charged-off debt are now routinely bought and sold by national collection firms and other entities. Indeed, it has become a common practice for debt portfolios to change hands numerous times.

And then there are the technological changes that affect debt collection. We will discuss some of those changes in part two of this post.

Source: insideARM, "Anticipating a New Regulatory Regime For Debt Collection," P-R Stark, Feb. 24, 2014

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