PORTLAND – Consumers who fall victim to unscrupulous debt collectors now can call on federal regulators for help, says a group of federal and state officials that met Wednesday in Portland.
Federal officials from the recently formed Consumer Financial Protection Bureau, including Director Richard Cordray, convened a public hearing and panel discussion at Merrill Auditorium along with consumer advocates and representatives of the debt collection industry.
Cordray introduced a national registry that the bureau has created to receive, document and resolve consumer complaints about debt collection practices. The registry went live Wednesday on the bureau’s website, www.consumerfinance.gov.
The bureau has been accepting complaints since July 2011 regarding bank services, credit cards, credit reporting, money transfers, mortgages, student loans, and vehicle or consumer loans. Now it has added debt collection to the list.
Cordray said about 30 million Americans came out of the recent financial crisis with at least one debt in collection. The average amount of that debt was about $1,400, he said.
Although creditors have a right to collect debts, Cordray said, some debt collectors don’t abide by laws that prohibit the use of deception, threats, intimidation and other forms of abuse.
“Our job is to root out bad actors,” he said.
Several local and regional experts spoke at the hearing, including consumer advocates and representatives of the debt-collection industry.
Frank D’Alessandro, regional directing attorney for Pine Tree Legal Assistance in Portland, spoke on a nine-member panel that advised consumers on what to do in the event of a debt-collection dispute.
D’Alessandro, whose organization provides free legal assistance, said research shows that consumers are far more likely to get a desirable outcome if they have legal representation.
He said the first thing a consumer should do after being contacted about an outstanding debt is request proof of the collector’s legitimacy. “We have seen cases where multiple different parties tried to collect the same debt from the consumer,” D’Allesandro said.
Patrick Morris, representing Minneapolis-based ACA International, the largest trade organization for debt collectors, defended collectors, saying the vast majority operate ethically.
He said it’s often the borrower’s lack of communication that leads to disputes and legal action. He urged consumers not to dodge calls from debt collectors.
“Our view is that debt collectors are not the enemies of consumers,” he said.
Also Wednesday, the consumer protection bureau released two bulletins “putting companies on notice about harmful debt collection practices,” according to its website. One bulletin warns debt collectors they cannot tell consumers that making payments will help boost their credit scores, because that is often not the case, the bureau said.
Another bulletin says that under the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, all creditors and debt-collection agencies are prohibited from using “any unfair or unconscionable means to collect or attempt to collect any debt.”
Creditors often hire agencies to collect outstanding debts, and in some cases they sell uncollected debts to those agencies at a discount.
Before Dodd-Frank, only third-party collection agencies were subject to federal regulations concerning fair debt-collection practices, the bulletin said. Now lenders that try to collect on loans are subject to federal regulations.
The bureau also posted five new “action letters” to its website Wednesday. They are form letters that consumers can download and send to debt collectors at various stages of disputes.
The first letter requests more information about the debt. The second notifies the collector of a dispute and requests proof of the debt.
The third letter restricts when and how the debt collector can contact the consumer. The fourth informs the collector that the consumer has hired a lawyer. The final letter demands that the collector cease all contact.
Wednesday’s hearing was part of an effort by bureau officials to engage with communities across the country, according to a news release. Similar meetings have been held in cities such as Baltimore, New York and Philadelphia.
Consumers can file complaints with the Consumer Financial Protection Bureau against debt-collection agencies and creditors, Cordray said. To file a complaint, click on the “Submit a complaint” link on the bureau’s website, or call the bureau at (855) 411-2372.
J. Craig Anderson can be contacted at 791-6390 or at: