If you’ve ever been to small claims court, you have likely seen a small sliver of what is typically an all-but-invisible, but huge money-making machine: the debt collection process. An attorney with a stack of files starts by disclosing to the folks who make their way into the room that he’s attempting to collect a debt. The group huddles, discussing how much it’s going to cost to put this behind the debtors, possibly reaching some sort of payment agreement before the judge enters the room. Debt collection is big business: in 2018, an estimated 8,000 collection companies brought in over $12 billion in revenue in the U.S. And across the state, Hoosiers are on the business end of this booming industry each and every day.
Here in Indiana, about 1 in 3 individuals with a credit file has a debt in collections. The process starts with a missed payment that snowballs into calls, a court date, and finally, wage garnishment. Indiana law does little to shield borrowers from sizable wage garnishments by creditors — our law matches the federal floor, essentially protecting only 30 times the minimum wage per week from seizure — so it is perhaps unsurprising that our state is estimated to have one of the highest proportion of workers with wage garnishments in the country. This exists in spite of the fact that the Indiana constitution protects debtors’ need to have “necessary comforts of life.”
For over 40 years, the federal Fair Debt Collection Practices Act has provided at least some protection to borrowers against harassment and abuse when they fall behind on their bills. The law was written when phones were secured to the wall and before Mark Zuckerberg had cut his first tooth and the law hasn’t been changed to consider if — or how — collectors could use new technologies to contact borrowers.
Enter the Consumer Financial Protection Bureau (CFPB).
Congress created the CFPB in the wake of the financial crisis to safeguard consumers and hold financial institutions accountable when they abused or deceived people. It also charged the CFPB with studying aspects of our ever-evolving financial system and developing new rules to protect American consumers. So in early May, the bureau produced a long-awaited proposal for updating the Fair Debt Collection and Practices Act. The proposal is about what you’d expect if you told the debt collectors to govern themselves: it allows unlimited emails, texts, and DMs (yes, in addition to hearing from that long-lost high school friend, you could be contacted by debt collectors over Facebook messenger and other social media platforms) and allows up to seven phone calls per week per debt. Experts worry that important disclosures could be sent — and missed — over email and that attempts to collect “zombie debt,” which is the clever shorthand for debt that has passed the statute of limitations, will increase if this rule is finalized as-is.
Luckily, built into the rule creation process is time for consumers to weigh in. The CFPB will accept individual and organizational comments on the proposal until Sept. 18, 2019. The National Consumer Law Center and other organizations have set up portals and guides to make commenting easy. So if you have thoughts about future missed bills or a financial rough patch leading to collectors blowing up your cell or becoming your new best friend on social media, let your watchdog agency know.