Here's What You Need to Know About the New Debt Collection Rules
U.S. Navy Courtesy Photo
By Cory Titus, MOAA
Keeping a security clearance is vital to one’s military service. For this reason, financial education and protections such as the Military Lending Act are essential for our military. Reporting by the Government Accountability Office shows financial issues are among the top reasons DoD and DHS members lose their clearances. According to the National Foundation for Credit Counseling, servicemembers carry more debt than their civilian counterparts.
When servicemembers return to civilian life, the financial costs of transition often leads to challenges. A report on Texas veterans shows they are turning to predatory lending like payday and auto title loans at higher rates than their civilian counterparts.
When these Texas veterans were contacted by debt collectors, 65% reported experiencing illegal threats and harassment. With both servicemembers and veterans taking on debt at higher rates, regulating debt collection practices is essential to protecting our troops, veterans, and their families from undue harassment. Debt collection is a major issue for servicemembers, accounting for the 26% of the Consumer Financial Protection Bureaus’s (CFPB) complaints from 2018. Of this percentage of complaints, 39% is regarding attempts to collect debts the servicemember does not owe. The proposed rules will only compound this issue by allowing debt collectors to effectively turn a blind eye to debt that has been forgiven due to passage of time.
Servicemembers and veterans and their families receive protections under the Fair Debt Collection Protections Act (FDCPA). Congress enacted the FDCPA in 1977 to prevent abusive debt collection because of the negative impact it has on people’s lives.
Since Congress passed the FDCPA, debt collectors developed new ways to harass consumers. The rules need updates to support the new information technologies like email, text messaging, and robocalling. The CFPB proposed new revisions to the FDCPA rules and are available for public comment.
While the CFPB’s proposal make many attempts to modernize the rules, there are concerning areas that will affect our servicemembers, families, veterans, and all Americans. The current rules provide no limit on number of contact attempts and have no discussion of modern technologies like email and text.
However, in the age of spam emails, robocalls, and robo texts, it is increasingly difficult for consumers to detect what is spam and what is not. This is why it is paramount consumers have the right to opt-in to their preferred method for receiving communications regarding debt notices. Over half the email messages sent each day are spam. The FCC reports “robocall volumne remains high and may be increasing.” CFPB debt collection surveys indicate consumers believe contact more than three times a week is excessive. The proposed rules not only allow for seven phone call attempts a week per debt, but do not cap frequency of text message and e-mail communications.
This is especially concerning given the unique challenges of service. For example, servicemembers stationed overseas could incur 10 months of text messaging fees without having the opportunity to opt-out. The proposed rules fail to protect consumers by permitting text messaging that is not free-to-the-end-user and is sent without consumer consent.
There is more work to be done to protect servicemembers and veterans and their families from debt collection. A 2018 CFPB report shows the challenges servicemembers and veterans face from the VA’s debt collection and the necessity for the government to follow the FDCPA as well.
This work starts with holding the line on the FDCPA and keeping consumer focused protections. Comments on the new regulations are due by Sep. 18. Take action now and comment on the proposed regulations.