It’s been a long day at work. The kids are working on their homework, and you have just finished dishes, so you bite your lip as you answer the call from an unfamiliar number, expecting to hear a telemarketer or political survey company calling (it is election season, after all). You’ve sent these calls to voicemail a few times in the last week, so curiosity has the better of you. After an indifferent “Hello,” the caller asks for you using your full name – the one that signaled a lecture was coming when your parents said it. The moment you confirm “yes, this is Matthew,” you are greeted with the dreaded words:

“Please be advised that this call is an attempt to collect a debt, and any information provided on this call will be used for that purpose.”

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Your pulse quickens. The caller tells you that you owe $285 for a line of credit that you had years ago. It doesn’t ring a bell – or does it? Things were tight after you graduated college and you stretched to make ends meet. The caller informs you that failure to pay may negatively impact your future ability to get credit. You decide to pay the debt to stop the calls after the collector tells you they’ll settle for $205.

Like many of the 70 million Americans with debt in collection, you paid this bill. You wanted to make the calls stop and preserve your hard-won credit rating. It may have paid an old debt that you owed. Unfortunately, you may also have double paid a debt, paid someone else’s debt, or even fallen prey to a debt collection scammer. 

Does it sound confusing? That’s because it is. The bad news is that debt collection is the most complained-about financial product currently tracked by the Consumer Financial Protection Bureau. Over 30% of CFPB complaints involve debt collectionBy federal estimates, there are over 6,000 debt collection companies currently operating in the United States. Debt collection is a cottage industry - 76% of debt collection firms have fewer than 20 employees.

The good news is that, as the federal government’s newest financial watchdog agency, the CFPB is empowered to create new debt collection rules to protect consumers, and they are currently doing precisely that. The CFPB is currently considering rules to overhaul the multi-billion dollar debt collection industry.

As CEO of the nation’s leading full-service debt marketplace, I welcome debt collection rulemaking that protects consumers and brings to justice scammers and financial predators. But in addition to safeguarding Americans in debt, the CFPB should draft clear, well-defined rules that don’t damage compliant third-party collectors, the overwhelming majority of which are small, mom-and-pop businesses. CFPB also needs to ensure that legitimate creditors can continue to access the liquidity provided by robust, secure debt sales.

In addition to common-sense rulemaking that supports industry-backed best practices (data security and transmission standards, portfolio chain-of-custody requirements, and processes and procedures for annual compliance audits), the CFPB should undertake a campaign to educate both consumers and the industry of their rights, obligations and responsibilities under existing legislation such as the Fair Debt Collection Practices Act and Dodd-Frank.

The CFPB should seize on this unique opportunity to educate as it regulates. By creating a new dynamic in the debt collection industry that benefits not just consumers, but also creditors and third party collectors, we will all be able to breathe a little easier next time the phone rings from an unfamiliar number.

Matthew Wratten is CEO of DebtTrader, a web-based marketplace that connects buyers and sellers of debt in a secure, transparent environment.


The views expressed by authors are their own and not the views of The Hill.