September 18, 2019
Consumer Financial Protection Bureau
1700 G St., NW
Washington, DC 20552
RE: Docket No. CFPB-2019-0022 and RIN 3170-AA41
Dear Director Kraninger:
On behalf of our communities in the state of Alaska, we the undersigned members of the Alaska State Legislature as well as civil rights, consumer, labor, faith, veterans, senior, business, and community organizations from Alaska write to recommend changes to the Consumer Financial Protection Bureau’s (CFPB or the Bureau) proposal governing third-party debt collectors. The proposal adds some consumer protections but also weakens the Fair Debt Collection Practices Act (FDCPA) by undermining its goals of stopping harassment, protecting consumer privacy, and preventing collection against the wrong person or in the wrong amount.
The description of the proposed rule explains, “the Bureau proposes to amend Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA), to prescribe Federal rules governing the activities of debt collectors, as that term is defined in the FDCPA (FDCPA-covered debt collectors). The proposal focuses on debt collection communications and disclosures and also addresses related practices by debt collectors. The Bureau also proposes that FDCPA-covered debt collectors comply with certain additional disclosure-related and record retention requirements pursuant to the Bureau's rulemaking authority under title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),” (84 FR 23274).
Debt collection is a leading source of consumer complaints to both the Federal Trade Commission (FTC), the CFPB, and the Better Business Bureau of the Northwest and Pacific. In 2018, debt collection was the second leading source of complaints collected by the FTC, generating more than 475,000 complaints. Debt collection was also the second most common source of consumer complaints to the CFPB, with many consumers stating they did not owe the debts described or the amounts were incorrect. It is important that this issue of wrongful collection be addressed, and we commend the CFPB for tackling debt collection.
Problems with debt collection are particularly stark in Alaska, where consumer abuses too often go unnoticed. Thirty-two percent of Alaskans have debt in collections, according to a 2018 Urban Institute study using records from a major credit bureau as well as estimates from summary tables of the US Census Bureau’s American Community Survey. That is higher than the national average of 30 percent. Additionally, Alaskans have 26 percent debt in collections in predominantly white neighborhoods, but 43 percent in predominantly nonwhite areas.
Medical debt in particular is a big problem. In 2015, 13% of servicemember and veteran complaints to the CFPB about debt collection focused on medical debt. Individuals believing their medical care was covered by the Veterans Administrations or other health insurance are often surprised to receive debt collection calls following treatment. In 2014, a panel of Army Reserve Suicide Prevention Program managers determined that debt and debt collections represented the second leading cause of suicide among Army reservists. Unregulated debt collection exacerbates an extremely serious health issue for the military.
In addition to the military, other groups have high rates of medical debt in collections, including Alaska Natives. In 2017, an Urban Institute study found that, for the data available, 20% people on the North Slope of Alaska have debt in collections. However, data isn’t available for the median amount of debt in collections for the majority of the state. In Anchorage, the median amount for white populations was $3,132. Because there are no majority Alaska Native census areas in Anchorage, the amount of Alaska Native people with debt in collections cannot be determined in this case. Despite insufficient data, case managers and financial counselors anecdotally report high rates of medical debt collection abuses among Alaska Natives, but there is no way to know how many people have had problems because often debtors will have unknowingly signed forced arbitration clauses, preventing them from pursuing litigation against a debt collection company or finding redress for their circumstances.
All too often, debt collection practices can be harmful, predatory, and unfair. Debt collectors can be abusive and threatening. Sometimes, collectors will text and call consumers to the point where their phone plan maxes out, making it impossible to receive texts or calls from their lawyers. When they reach debtors, debt collectors will harass individuals endlessly. The Association of Credit and Collection professionals reported they called American consumers over one billion times in a year. Collectors will illegally threaten co-workers or family members on the phone. For active service members, debt collectors will call commanding officers to tell them about outstanding debts. Often, debt collectors will threaten criminal retribution, when debt collection is a civil matter. One Alaskan constituent reported that a debt collector found his home address and threatened to call the police if he didn’t pay his debt in full in the next 30 minutes. Under the FDCPA that threat is abusive, misleading, and illegal. The new CFPB rule continues to permit violations of consumer privacy, respect, as well as job security, and must be revised.
According to the Alaska Division of Corporations, Business and Professional Licensing, collection agencies in Alaska have to register with the state, but out-of-state agencies do not need to register. For debt collectors like LVNV Funding LLC, Alaska only encounters out-of-state debt collectors in court. LVNV was the fourth most frequent plaintiff in Alaska District Court debt cases in 2018. According to data from the Alaska State Courts System, debt collectors comprised 40 percent of the top plaintiffs in Small Claims and District courts in 2017 and 2018. Of the cases where only one side was represented by a lawyer, 90 percent of the time they were representing debt collection agencies. When there is a legal defense of the consumer, cases will often be dismissed for abusive collection practices or because the collections are for a different person. Common errors are just one reason it’s crucial to have strong rules that help our constituents defend themselves.
In addition to abusive practices, debt collectors often use deceptive practices, and convince consumers to pay debts they do not actually owe. Debt buyers are companies that purchase debts from original creditors, intermediaries, or other debt buyers. Debt buyers either try to collect the debts themselves, place debts with collection agencies for collection, or sell the debts to other debt buyers. Errors increase as debts change hands, and often result in incorrect names or contact information being passed along. Debt collectors also trick consumers into paying debts for which the legal time limit to sue has expired, commonly called time-barred zombie debts. The proposed rule does not ban collection of time-barred debt in and out of court. It should, particularly because these debts are so old that records are lost, the collector may have the wrong person or wrong amount, and the debt cannot be collected without mistakes or deception.
This rule is critical, as incentives for debt collectors are currently misaligned with the ability of individuals who want to pay off their debts to do so. This rule happily includes limiting collectors to one conversation per week—although this should be per week total, rather than per week per debt. With this rule, collectors could not sell accounts that were paid, discharged in bankruptcy, or where identity theft reports were filed. It is imperative to prohibit the sale of time-barred or disputed debts as well. Otherwise, this rule will leave millions of Americans, including many of our constituents, at the mercy of predatory debt collectors.
Implementing protections for consumers is not at odds with debt collection practices. These practices must be improved, so that they accomplish their goals of recovering monies owed without harming the Alaskan communities we represent and use practices that target the most vulnerable, particularly families with lower incomes, communities of color and those on fixed incomes. The CFPB’s Notice of Proposed Rulemaking fails to acknowledge this byproduct of current collection practices and needs to take serious, strong steps to protect consumers. We urge the CFPB to strengthen the final rule to vigorously enforce consumer protections instead of tacitly endorsing abusive collection practices by not addressing them.
Senator Tom Begich – Senate Minority Leader
Representative Zack Fields
Alaska Public Interest Research Group (AKPIRG)
Anchorage Community Land Trust
Cook Inlet Housing Authority
Fairbanks Climate Action Coalition
Native Peoples Action
Northern Justice Project, LLC
NAACP, Anchorage Chapter
The Alaska Center