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Prepared Remarks of CFPB Director Richard Cordray at the Consumer Advisory Board Meeting

October 31, 2016 / Source: CFPB

Washington, D.C.
By Richard Cordray – OCT 27, 2016
Welcome to this meeting of the Consumer Advisory Board. As always, it is a pleasure to be here. You have much to offer the Consumer Financial Protection Bureau – telling us what you are seeing and hearing from your various vantage points.

I especially want to welcome our newest members, joining us for the first time since their appointment in August. Thank you Maeve Brown for taking the chair, and Ann Baddour for serving as vice chair. Together, over the last few years, we have had good discussions and valuable sharing of perspectives. I look forward to what we can accomplish moving forward.

Today, I want to talk to you about some of the issues people encounter when they are paying back debts. Specifically, I want to discuss the debt collection market and the student loan servicing market. Both are markets where consumers cannot vote with their feet, and where incentives and practices are not always aligned with consumer interests. We have seen great consumer harm in both markets, and we know that much work remains to be done. So I want to share with you a brief outline of our proposals under consideration that would overhaul the debt collection market. And I want to share with you some perspective on our continued efforts to improve the student loan servicing market. Many of you are engaged in these issues yourselves, and so we look forward to hearing from you.


Debt collection is a multi-billion dollar industry, with more than 6,000 debt collection firms in the United States. It is a difficult task in many ways, as I know first-hand from my days as a public debt collector in various offices, including as the Ohio Attorney General. Sometimes debt collectors are given inaccurate or incomplete information about the debts they are seeking to collect. They may also add errors of their own through processes that compound the harm to consumers. All of this generates problems and disputes, and it can drive up costs to collectors, which hurts the industry as a whole. When an account is sold or moved, the information that transfers may benefit only the collector, not the consumer, which creates still more problems.

The proposal we have under consideration right now would overhaul the entire process from the moment third-party collectors first receive their debt portfolios to their very last efforts to collect. The proposal also covers many debt buyers, and as part of our work in this area, we plan to address issues with first-party debt collectors on a separate track.

Debt collection generates more complaints to the Consumer Bureau than any other financial product or service. That has been true at all levels of government, federal as well as state, around the country, since well before we came along. We have heard complaints about collectors seeking to collect debt from the wrong consumer, for the wrong amount, or that could not legally be enforced. When consumers are contacted by collectors for debt they do not recognize, they often do not know where to turn. Some feel pressure to resolve the debt without a clear understanding of their rights. Some pay a debt they think is wrong, just to get the collector off their back. Other times, consumers spend significant time and money trying to dispute the debt, often in the face of unnecessary obstacles, simply because they have not carried all their personal records with them through all the years of their lives.

According to the preliminary results of a survey we conducted, about one out of three consumers has been contacted by a creditor or collector trying to collect a debt within the past year. That is some 70 million consumers. Many reported that they were being pursued on multiple debts – between two and four debts for most of these consumers. And fully one-third of the consumers contacted about a debt in the last year said they believed the collector was trying to collect the wrong amount.

In July, we held a field hearing on these issues in Sacramento, Calif., and thereafter we convened a Small Business Review Panel to gather feedback. And we will continue to seek counsel from consumer groups, the public, industry, and other stakeholders as we proceed with the rulemaking process.

Under our proposal, debt collectors would need to have more reliable information about the debt before they can collect. They would have to limit their attempts to make contact, clearly disclose details about the debt, and make it easier to dispute the debt. When responding to disputes, they would not be able to pursue collection without sufficient evidence. These conditions and restrictions would apply as well if the debt is sold or transferred. Our goal is to bring more accuracy and accountability to a market that desperately needs it.

Our proposal under consideration is not our first foray into the debt collection marketplace. In October 2012, we issued a rule establishing our supervisory authority over nonbank debt collectors with more than $10 million annually in consumer debt collection receipts. This covers some 175 debt collectors accounting for more than 60 percent of this market, and it was the first time the federal government had ever asserted supervisory authority over third-party debt collectors. We also have enforcement authority in this area, as do the Federal Trade Commission and state attorneys general, and we consistently work together in a group effort to police unlawful practices in the industry. Both on our own and with these partners, we have ordered companies to halt violations of law and made them refund hundreds of millions of dollars they had unlawfully collected from consumers. All of that experience creates a strong foundation for us now to proceed with our rulemaking to reform the debt collection market.

Debt can overwhelm people and leave them feeling helpless and powerless as they try to fend off harassing debt collectors. By cleaning up the integrity of this process, we can resolve many issues before they become problems.
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