MI AG urges Consumer Financial Protection Bureau to protect consumers from debt collection misconduct

Michigan Attorney General Dana Nessel on Thursday joined 27 other Attorneys General in urging the Consumer Financial Protection Bureau (CFPB) to revise its proposed debt collection rule and place the interests of consumers over those of debt collectors.

“Debt collection abuse is a serious and widespread problem for many Michigan residents who work tirelessly to make ends meet,” said Nessel. “Not only will this proposed federal rule allow debt collectors to call multiple times per week on each debt, but it will also allow them to make contact via social media. We expect the Consumer Financial Protection Bureau to do what their name suggests: financially protect consumers, and that means ensuring debt collectors respect the balance between lawful debt collection and consumer protection and privacy.”

In their letter, the Attorneys General recognize the importance of lawful debt collection. However, that does not grant debt collectors free rein to do so “in whatever manner they wish.”

The proposed federal rule falls short of protecting consumers by allowing debt collectors to:

• Place up to seven calls per week for each debt a consumer has. According to the CFPB’s own research, almost 75% of consumers have more than one debt; meaning consumers could still receive dozens of calls per week under the proposed rule;

• Send an unlimited number of electronic communications, including direct messages on social media platforms, without consumers’ consent;

• Take advantage of consumers that fundamentally do not understand their rights or obligations when it comes to time-barred or “zombie” debts – unpaid debt with a statute of limitations on how long a collector can sue to force payment – allowing a debt collector to sue or threaten to sue if they “know or should know” that the applicable statute of limitations has expired, which compounds the misunderstandings and risks consumers already face;

• More easily file baseless lawsuits on a massive scale. The proposed rule would erode the Fair Debt Collection Practices Act’s requirement that attorneys be meaningfully involved with debt collection litigation, an important check on debt collectors’ ability to flood state courts with lawsuits that are based on minimal or no evidence; only incomplete or unreliable records. 

“Despite decades of public and private enforcement of the Fair Debt Collection Practices Act, widespread deception and abuse have continued in the $11.5 billion debt collection industry. It’s incumbent on us to object to this proposed rule, because it doesn’t present consumers with the meaningful protections they need or deserve,” Nessel added.

In their letter, the Attorneys General commend certain aspects of the rule including its prohibition of  “passive debt collection” — a particularly coercive practice in which debt collectors report debts to credit reporting agencies before attempting to collect on them.

Attorney General Nessel joins the Attorneys General of California, Colorado, Connecticut, Delaware, the District of Columbia, Idaho, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and Wisconsin in sending this letter to the CFPB.