Update: As of February 9, the Trump administration has ordered the Consumer Financial Protection Bureau to halt operations. Russell Vought, the new director of the Office of Management and Budget, sent an email to the agency’s employees telling them not to perform any work-related tasks.
In addition to state and local laws, debt collectors must comply with federal laws. Each administration comes with changes, and it’s anticipated that the Trump administration will change federal debt collection laws.
Federal laws currently regulating debt collection include oversight of banking regulations, regulation of lenders, statutory limitations on the behavior and actions of debt collectors, protection of consumers, and more.
The Fair Debt Collection Practices Act (FDCPA) protects consumers from abusive debt collectors. All collection professionals across the U.S. must comply with the law when seeking to collect a debt from a consumer.
The law specifies:
- What a debt collector can disclose when speaking with someone other than the consumer debtor
- How a debt collector may communicate with the consumer debtor
- Behaviors that constitute harassment or abuse
- The definition of unfair practices by a debt collector
- How a debt collector must validate a debt
- How to handle a debt disputed by the consumer
- Where you can sue the consumer, and more.
The law provides for civil penalties for every violation of the FDCPA and a limitation on money damages if the debt collector is sued in a class action lawsuit by consumers.
The FDCPA applies only to the collection of debt incurred by a consumer primarily for personal, family, or household purposes. There was talk in the industry that the FDCPA was going to govern the collection of debts owed by small businesses, but the law was not amended. It is my opinion that the expansion of the FDCPA will not occur during the Trump administration.
To record “abusive tactics” within the financial industry, the Obama administration created the Consumer Financial Protection Bureau (CFPB). The CFPB is meant to ensure that banks, lenders, and other financial institutions treat consumers fairly. The agency provides education to consumers about debt collectors. It also offers a portal for consumers to file complaints. The CFPB then sends these complaints to the named debt collector for their response.
It’s this author’s opinion that, at a minimum, the CFPB’s regulation of debt collection and possibly more will be on the administration’s list to cut. Already, the Trump administration has fired Rohit Chopra, the director of the Consumer Financial Protection Bureau.
Rather than a broad federal law governing the collection of commercial claims, federal laws governing the collection of debt owed by businesses are industry-driven. An example is the Perishable Agricultural Commodities Act (PACA). PACA provides industry guidelines and regulations to promote fair trade for those in the fresh and frozen fruit and vegetable industry. A creditor selling on terms of freight on board will need to prove compliance with PACA to prevail.
Whether the new administration will make changes that affect New York debt collection and what those changes will be is unknown at this time. We will follow and report updates.
President, Frank, Frank, Goldstein and Nager
