Consumers have a new headache as 2021 draws to a close: Debt collectors can now contact them by email, text and social media, thanks to a rule implemented earlier this month by the Consumer Financial Protection Bureau (CFPB).
The change could make consumers wary about any emails, including promotional messages from brands. But its advocates argue that it will benefit both sides.
“Debt collectors and consumers have been trapped in a time warp,” wrote Kathleen L. Kraniger, the former head of the CFPB, in a blog post last year. “They have been required to communicate with each other under standards Congress enacted in 1977.”
It is not clear that consumers have been clamoring for debt collectors to use modern technologies to hound them. Indeed, consumer advocates warn that “unleashing debt collectors in the digital realm may only complicate things for people with financial obligations,” reporter David Lazarus writes, calling the change “a delayed Christmas present from Donald Trump.”
“This could work both ways,” says Linda Sherry, a spokesperson for the advocacy group Consumer Action, according to Lazarus. “They could ignore a real debt collector or they could respond to a scammer, believing it to be a real collection.”
Collection scams have existed prior to this, many of them conducted via abusive phone calls.
Both sides may well benefit from the addition of email and other digital channels by legitimate debt collectors and the codification of rules. But companies must be cautious about the latter.
“In order for a debt collector to use email or text messages when communicating with a consumer, they must first obtain consent directly from the consumer,” writes attorney Thomas C. Wolff on the Ward and Smith P.A. website.
Woolf makes the condition that the CFPB has “provided form language that creditors should use to inform consumers that they intend to share their email address with a debt collector, and the debt collector must use reasonable means to confirm that the creditor has followed all required procedures before utilizing a consumer's email address.”
In addition, Woolf adds this benefit for consumers -- that they are given “the right to ‘opt-out’ of communications by text or email, so long as they notify the creditor or debt collector that they wish such communications to cease.”
This could add a new area of litigation. The U.S. Court of Appeals for the 115h Circuit recently ruled that a debt collection company “violated the Fair Debt Collection Practices Act (FDCPA) by disclosing a consumer’s debt-related information to a mailing vendor,” JD Supra writes.
JD Supra adds that the rule has sent “shockwaves through the debt-collection and mailing industries.”
The case started when a consumer sued against the debt collector, contending that personal data relating to a hospital debt was shared with a third-party vendor for the purpose of generating a collection letter.
The data included the person’s “name, his outstanding balance, the fact that his debt resulted from his son’s medical treatment and his son’s name,” JD Supra writes.
This obviously concerned a postal mail letter, but such a lawsuit could also be filed with regard to email collection efforts and sharing of data with vendors.