For Immediate Release:
September 19, 2019
Contact: Matt Baca (505) 270-7148
Santa Fe, NM–New Mexico Attorney General Hector Balderas today announced he
joined a bipartisan coalition of 28 attorneys general from around the nation in sending a
letter to the Consumer Financial Protection Bureau (CFPB) urging the agency to revise
its proposed debt collection rule and place the interests of consumers over those of debt
collectors.
“New Mexican families who already struggle to make ends meet must have the fullest
protections from unfair debt collection practices that put profits over people,” said
Attorney General Balderas. “My office will continue to fight for every New Mexican’s
economic security, so that everyone has an equal opportunity to be safe and to
prosper.”
In 1977, Congress enacted the Fair Debt Collection Practices Act (FDCPA) after finding
that there was “abundant evidence of the use of abusive, deceptive, and unfair debt
collection practices by many debt collectors…[that] contribute to the number of personal
bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual
privacy,” and, importantly noted, that “[e]xisting laws and procedures for redressing
these injuries are inadequate to protect consumers.” Despite decades of public and
private enforcement of the FDCPA, widespread deception and abuse have continued in
the $11.5 billion debt collection industry.
While the coalition of attorneys general commend certain aspects of the CFPB’s
proposed rule in their letter, they note the rule, proposed in May 2019, would prohibit
so-called “passive debt collection” — a particularly coercive practice in which debt
collectors report debts to credit reporting agencies before even attempting to collect on
them. The proposed rule also expressly acknowledges that it does not preempt state
laws that are more protective of consumers than the FDCPA.
The proposed rule falls short 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 with one debt in collection
have multiple debts in collection, meaning a consumer with five debts in
collection could receive up to 35 calls per week.
• Send a virtually unlimited number of electronic communications, including direct
messages on social media platforms, without consumers’ consent. Because
electronic communications, such as texts and emails, are essentially costless
for debt collectors, these companies would have no incentive to minimize these
communications.
• Infringe upon a consumer’s right to privacy. When contacting consumers, debt
collectors could speak with any third party who happens to answer the
consumer’s phone (such as a roommate) and leave what the CFPB refers to
as a “limited content message.” While this message will purportedly not convey
information regarding a debt, the CFPB ignores the likelihood that consumers
will become familiar with the generic and formulaic language and recognize
these messages for what they are.
• Take advantage of consumers that fundamentally do not understand their rights
or obligations when it comes to time-barred or “zombie” debts, as the CFPB’s
own surveys attest. First, the proposed rule will allow debt collectors to collect
debts even if they cannot sue due to the expiration of a statute of limitations. In
fact, in some jurisdictions, by paying any portion of the debt a consumer
restarts the statute of limitations, essentially giving the collector back the right
to sue. Second, the proposed rule would water down consumer protections
because it would only allow a debt collector to sue or threaten to sue if they
“know or should know” that the applicable statute of limitations has expired,
whereas the current “strict liability” standard means collectors violate the law if
they sue on expired debt — whether they knew or had reason to know is
irrelevant.
• More easily file baseless lawsuits on a massive scale. The proposed rule would
specifically erode the FDCPA’s requirement that attorneys be meaningfully
involved with debt collection litigation, which would overwhelm state courts with
lawsuits that are based on form complaints.
Finally, a glaring omission of the proposed rule is that it does not cover first-party
creditors. The coalition of attorneys general argue, in their letter led by New York
Attorney General Letitia James, that there is no reason to treat those who originated a
defaulted loan differently from third-party debt collectors. The CFPB has the statutory
authority to extend the protections against unfair, deceptive, and abusive practices to all
debt collectors, yet declined to do so.
Attorney General Balderas joins the attorneys general of New York, California,
Colorado, Connecticut, Delaware, Idaho, Hawaii, Illinois, Iowa, Kentucky, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Jersey,
North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington,
Wisconsin, and the District of Columbia in sending this letter to the CFPB.