Would you like to weigh in on the debt collection industry's practices?
The Consumer Financial Protection Bureau is seeking comments on major areas of concern with that industry. The CFPB has made substantive reform of the debt collection business a priority, a welcome development.
To be clear, people should pay their debts. A properly functioning debt collection industry is critical to a smooth-operating credit economy.
And debt collection is a major industry, with more than 4,000 third-party debt collection firms employing more than 140,000 people. Industry revenue was nearly $12 billion in 2010. That said, the business feels too much like the credit economy's Wild West.
Consumers file more complaints with the Federal Trade Commission about debt collection than any other industry. Sad to say, it's all too common for third-party debt collectors not to have proof of the debts they're collecting on.
Sometimes, the collectors target the wrong person. "Consumers most commonly complain to the FTC that collectors harass them, demand amounts that consumers do not owe, threaten dire consequences for nonpayment, or fail to send required notices," according to the CFPB.
In my experience, a major issue is that consumers don't know their rights, an understandable lack of knowledge that collectors turn to their advantage. Adding to a growing sense of injustice over the whole debt collection business is the practice of debt collection litigation — turning to the courts — to recover on debts gone bad.
The 114-page document filed by the CFPB is full of fascinating information. The consumer watchdog is concentrating on soliciting ideas on four major areas.
• The 1977 Fair Debt Collection Practices Act prohibits bad behavior and deceptive collection practices by third-party debt collection companies. Question is, should the guidelines be expanded other players in the business?
• Is there a need for clearer documentation of debts sent to collectors and debt buyers?
• Do consumers receive enough information about their alleged debts?
• How to adjust rules of acceptable behavior designed for an era dominated by telephone, postal mail and telegraph in a communications environment now defined by Internet, smartphones, auto-dialers and social media?
I'm cautiously optimistic that regulatory improvements are possible. Yes, there are those in Washington who will automatically oppose anything proposed by the CFPB.
But I think the financial services industry has a stake in making the rules of debt collection clearer, backed with better documentation and communication guidelines updated to the 21st century.
For example, JPMorgan Chase recently announced it has stopped most bad loan sales to outside debt buyers. Too much can go wrong for too little gain.
In the meantime, if you're dealing with a debt collector, your mantra should always be, "Get everything in writing."
You want to create a written record, which will help you out if there are any problems later on.
Chris Farrell is economics editor for "Marketplace Money." His e-mail is email@example.com.