Thirty million Americans owe at least $1,500 or more and are actually being actively pursued by debt collectors. The thing is, not all of these people actually owe the debts being claimed. This is part of the reasoning behind the Dodd-Frank Financial Reform Act that has recently stepped into the spotlight as a true "consumer watchdog".
Under the provisions of the act, the federal agents can literally walk into any of the major collection bureaus and evaluate tactics, records, and behaviors. What would this do? Consider a recent example:
A consumer struggling with debt used a debt settlement service to help them negotiate a lump sum payment of an outstanding debt. They received notice that around 60 percent of the amount owed was accepted as payment in full and that the account was closed. Oddly enough, that consumer kept getting messages about the outstanding balance. When they looked at their credit report (90 days after the account was closed) there was a debt collection service still seeking the sum. Clearly, this was fraudulent and yet the group was still seeking to collect the sum that had already been resolved.
Federal guidelines for debt collectors
The new federal guidelines would not only help that consumer to get a cease and desist against the group, but the risks to the debt collection agency would be so substantial that they would hesitate to use this behavior in the future.
Unfortunately, there are more than four thousand debt collection groups in the U.S., and the new guidelines give federal authority only where the company has over $10 million in receipts. So, this leaves a huge number of "un-policed" groups, but it doesn't leave consumers out in the cold. They can directly contact the CFPB (ConsumerFinance.gov) to log complaints, seek help, and get answers.
This means that anyone who has a debt that which has been considered a default (usually a debt that is more than 120 days delinquent) and is sold to a collection agency that actually "buys" the debt and seeks the proceeds as a profit; or handed over to a collection agency who receives a fee if the debt is resolved; or in the hands of an attorney who is collecting through litigation, is protected.
It should be noted that the CFPB is also the agency behind the recent multimillion-dollar settlement that Capital One, Discover card, and American Express must repay to clients as well. This is money that is to be returned to customers due to deceptive marketing and "add on" fees that were fraudulent and misleading.
Thus, it pays for a consumer to consider this agency as a true ally and resource when something unexpected or seemingly unfair is occurring with their personal credit. The group is seeking to make it wiser and easier for credit issuers and debt collectors to simply operate within the law. Using words like "fairness" and "transparency" the agency seeks to turn the tables on would-be fraudsters and instead make the marketplace a more equitable location.
So, if you are one of the many tens of millions of American consumers carrying debt that is under collection, don't feel that your credit report is open to blatant abuse and that you must accept the behaviors of the collection agencies. There are guidelines and standards, and these groups are held accountable for working outside of the established laws.
The steps you must take include getting updated copies of your credit reports as debts are resolved, contacting the debt collectors directly when you know that they are in error or behaving in a way that is doubtful, and then contacting the CFPB when you know you are the victim of illegal practices.
Jack Chien is a money expert, author and personal finance journalist who specializes in explaining complex subjects in an accessible and engaging way. He is the cofounder of PersonalFinanceNews.com, an aggregator of the top personal finance news, stories and advice. You can find more articles by Jack on the Personal Finance News Blog. He contributes regularly there.
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