Debt Collection Reform on the Horizon?
A recent report from CreditBloggers.com notes that U.S. Senator Al Franken (D – Minn.) has proposed new legislation that would require debt collectors to follow more stringent guidelines when attempting to collect on debts.
The proposal should be welcome to anyone who has ever felt frustrated, overwhelmed or simply stressed out by aggressivedebt collection practices. Here’s a look at the terms of the proposed law, the “End Debt Collector Abuse Practices Act of 2010”:
- More thorough validation: Currently, debt collectors are required to provide debtors only with the name of their creditors and the amount they owe when making contact about a collection attempt. The proposed law would add more stringent requirements, including the date of the last payment; the date of default; an itemized list of principal, interest and fees; and a list of the consumer’s rights.
- More complete dispute investigations: If the new bill becomes law, debt collectors would be required to thoroughly investigate any consumer disputes of a debt. As the law now stands, many debt collectors simply stand by their initial stance: we say you owe it, so you do.
- Elimination of arrest warrants as debt collection measures: It seems that, across the country, there’s been an upswing in arrest warrants for people who have defaulted on debts. Franken’s bill would eliminate this practice for two major reasons: first, it’s difficult for people in jail to make enough money to repay debts, and second, arresting debtors forces taxpayers to cover the cost of debt collection.
- Increase of civil penalties possible for debt collectors: As the law now stands, consumers who sue debt collectors for damages for unfair collection practices can collect up to $1,000 in statutory damages – but this figure has apparently not been changed for more than 30 years. Franken’s bill would update the $1,000 cap to align with current Consumer Price Indices and thus hopefully deter more wrongdoing on the part of collectors.
Potential Impact of Improved Consumer Protection
Should Franken’s bill pass into law, it could improve the way debt collectors treat debtors. One specific outcome that might result is that fewer debt buyers could aggressively collect on old debts.
As the system now stands, people can buy old debts for pennies on the dollar, then aggressively collect on them. Even debtors who have no legal obligation to pay sometimes do, either because they don’t understand their rights or because they feel guilty for not having paid.
But the increased debt identification requirements would make secondary debt buying and collecting nearly impossible to do legally.
Your Rights with Debt Collectors
It should be noted that this proposed bill would update the Fair Debt Collection Practices Act, existing federal legislation that protects the rights of consumers from unfair and abusive debt collectors. If you think your rights may have been violated by a debt collector, you may want to contact a lawyer.
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