In 2007, Bart Bryant, a blues-rock musician in Connecticut, got the phone call from hell. His phone rang and on the other end was a debt collector from an agency in New York state. The man, who claimed to be an attorney, was calling about a small gas card debt that Bryant's son owed. Within minutes, Bryant said he was subjected to racial and anti-Semitic slurs, foul language, degrading comments about his wife and taunts encouraging him to commit suicide. "The caller went way beyond locker-room talk," recalls Bryant, who called the police and filed a lawsuit against the debt collection company. Eventually, the case was settled out of court.
In the wake of the economic downturn in 2007, such hard-charging debt collection tactics -- threats of arrests, accusations of lying and general harassment by phone at home and at work -- became more common. The business is a big one: In 2012 third-party debt collectors earned $12 billion going after outstanding debts, according to Philadelphia-based Corporate Advisory Solutions LLC. Typically, debt collectors book revenues based on a negotiated percentage of the amount recovered, says Mark Schiffman of ACA International, the largest association of debt collectors in the U.S.
Those billions in revenue came at an emotional cost to consumers. The Federal Trade Commission says that it received 199,721 complaints about such aggressive debt-collection practices in 2012 alone. That's up from 152,718 complaints in 2010, or almost 31 percent.
Filling a Gap
On July 10, the Consumer Financial Protection Bureau announced that it would expand its focus on debt collection practices from third-party debt collectors to banks that mistreat customers while pursuing unpaid debts. The new policy fills a gap in federal anti-harassment law that previously excluded creditors who collected debt themselves rather than hiring third parties to do the work for them.
Among the changes that will now be applied to banks pursuing debts:
--If a consumer disputes the debt or the amount of the debt, collectors must end the collection effort or suspend it pending verification.
--Debt collectors will have limits on when they can leave voicemails that disclose the debtor's name and the amount the debtor may owe.
--Debt collectors may not harass or abuse a consumer while attempting to collect a debt .
--Debt collectors must ensure policies are in place to prevent communication with third parties such as co-workers and neighbors about the debt.
--Debt collectors may not call a consumer at his workplace once advised that such calls are prohibited by the employer.
-- Debt collectors may not violate the Fair Debt Collection Practices Act, which aims to eliminate abusive debt collection practices.
--Debt collectors must record 75 percent of their debt collection calls and must retain the records for 90 days after they are made.