The Consumer Bureau’s Reckless Plan for Debt Collection

From today’s Wired Magazine:

WE LEARN IN email 101 that hyperlinks from unfamiliar senders are breeding grounds for scams. Microsoft has warned against clicking on foreign links for decades. The Federal Trade Commission has repeatedly cautioned Americans to be wary of malware and phishing expeditions. Last year, the Federal Communications Commission alerted consumers to a new cyber threat it dubbed “smishing”—targeting consumers with deceptive text or SMS messages—and urged consumers to “never click links, reply to text messages or call numbers you don’t recognize.”

The Consumer Financial Protection Bureau apparently skipped these lessons. Despite many warnings, the CFPB has proposed a rule that could require consumers to click on hyperlinks in unfamiliar emails. The proposal allows debt collectors to deliver important information about a debt and a consumer’s rights via links in text messages and emails—without first obtaining consent to electronic communications, as is normally required under federal law.

Debt collectors are required to send a “validation notice” that tells a consumer when a debt has been placed in collection and that the consumer has the right to get information to be able to verify or dispute it. When Congress enacted the Fair Debt Collection Practices Act in 1977, it considered the validation notice critical to minimizing mistaken identity and errors on the amount or existence of a debt.

The risk of collectors going after the wrong person or wrong amount is much greater today. Since 1977, a new industry has bloomed: debt buying. As director of the FTC’s Bureau of Consumer Protection, I initiated a 2013 study that found nine of the largest debt buyers alone collectively held a debt of $143 billion from more than 90 million consumers. (As of 2017, two of the largest debt buyers, Encore Capital Group and Portfolio Recovery Associates, held a combined debt of$17.6 billion, about the GDP of Iceland.) Debt buyers sell and resell debts for years on end, typically without account records verifying that the debts are accurate, making the validation notice even more essential. Without one, a consumer won’t be told how to dispute a debt, and they may be harassed for a debt they do not owe. According to an analysis of the CFPB’s complaint database, 44 percent of complaints against debt collectors concern attempts to collect a debt that the complainant does not owe. Worse yet, the collector could report the debt to credit reporting agencies, damaging the person’s credit, or even bring suit.

Read the complete article here.