Garnet Capital Advisors Blog

Collection agencies may communicate with consumers in debt via text or email in addition to phone calls as soon as next year.

As outlined in a recent Wall Street Journal, consumers who are behind on their debt payments may often find themselves being bombarded with calls from third-party collection agencies. But with proposed limits to phone calls, consumers may soon start to receive emails and text messages instead if newly proposed regulations are approved.

Recently, the Consumer Financial Protection Bureau (CFPB) announced a plan to reduce the number of telephone calls that consumers are getting from collection agencies and instead focus on digital communication to collect on overdue debts.

These days, people are less likely to pick up telephone calls or voice mails and are more likely to be easily reached via text and email.

The CFPB's proposed rule would mean debt collectors would be permitted to try as many as seven times per week to call a consumer by phone. That said, debt collectors would not be able to call again for another full week after making contact with a consumer. Right now, such restrictions are not applicable to texts or emails.

The implementation of such a rule will make it more difficult for collection agencies to try to get in touch with consumers via telephone. And as such, they would be more apt to embrace technology to communicate for the purposes of collecting debts.

A new proposed rule by the CFPB would allow debt collectors to communicate with consumers using digital technology.

Under the Fair Debt Collection Practices Act (FDCPA), emails and texts will be subject to the same rules as telephone and mail communication. For instance, debt collectors are not permitted to contact consumers in the early morning or late evening unless the consumer agrees, nor contact consumers at work (with some exceptions).

But opponents to the proposed rule argue that consumers would be at greater risk of harassment from debt collectors, with as many as seven phone calls allowed to be made every week. 

By mid-2018, there were approximately 25 million consumers with debts being tracked down by third-party collectors. The CFPB also received 85,000 complaints from consumers about debt collectors last year, and over 10,000 lawsuits against collection agencies are filed every year, making this particular topic a touchy one for the financial industry.

On the other hand, proponents of the CFPB's new proposed rule claim that collectors will be better able to collect more debts with an increase in the use of digital communication like text messages and emails. It requires very little effort to send a text or email to someone. Just a couple of clicks and the message will be conveyed.

If the CFPB's new rule is enacted, it could certainly shake things up in the financial industry and may affect banks and lenders to some degree. In the meantime, it would be in the best interests of financial institutions to verify the strength of their loan portfolios and identify where improvements can be made.

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