The larger and more aggressive debt collection agencies will have Uncle Sam looking over their shoulder in January. The new Consumer Financial Protection Bureau intends to rein in the abusive collectors and give harassed consumers somewhere else to go other than the overwhelmed Federal Trade Commission which previously had responsibility for keeping collectors at heel. Collection firms that follow the law will still be able to do their job; the C.F.P.B. is not a safe harbor for anyone with legitimate delinquent debts. Complaints about aggressive and illegal dunning practices have been the number-one consumer gripe to the FTC for years.

The Fair Debt Collection Act is the agency’s charter and reason for doing business. The law prohibits unfair, deceptive and abusive collection tactics. Please take note of those three words, unfair, deceptive, and abusive. There is a lot of latitude in those adverbs and it will probably take years and many hours in court to determine exactly what is unfair, deceptive, or abusive. Recall that although Congress writes the laws, it’s the rules and regulations written by the agency that determine how those laws are applied. Think of the law as the strategy, and the regulations as the tactics.

About 175 debt collection agencies will fall under the Bureau’s steely gaze. The law applies to firms with more than $10 million in annual receipts. Some of the things that will be looked for include whether collectors are properly identifying themselves and providing an accurate description of the amounts owed, and whether employees communicate politely and respectfully without resorting to threats and intimidation. Prohibited conduct includes profanity, calling repeatedly or continuously with the intent to annoy or harass, threatening to tell an employer about the debt, or threatening to throw the debtor in jail unless he pays up. Bureau sleuths will also examine how the credit agencies handle consumer complaints.

The bill collection industry claims to be in favor of this additional supervision, although it thinks the $10 million threshold is too low. In a statement, the trade organization said its members “embrace consumer protection but it has to be balanced with the industry’s ability to do their jobs in recovering rightfully-owed consumer debt.” Expect a lot of fine-tuning in the months to come.

Source: Dallas Morning News, “Feds to start supervising large debt collectors in January,” Pamela Yip, Nov. 4, 2012