The Debt Collection Market and Selected Policy Issues

Changes from May 6, 2021 to June 22, 2021

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The Debt Collection Market and Selected
~~May 6~~June 22, 2021 , 2021
Policy Issues
Cheryl R. Cooper
When a consumer defaults on a debt, a third-party debt collector often collects the debt obligation When a consumer defaults on a debt, a third-party debt collector often collects the debt obligation
Analyst in Financial Analyst in Financial
rather than the lender to whom the debt is originally owed. The debt collection market helps rather than the lender to whom the debt is originally owed. The debt collection market helps
Economics Economics
lenders recoup their losses when a consumer defaults, generally making consumer credit and lenders recoup their losses when a consumer defaults, generally making consumer credit and

other related markets more efficient. When lenders can effectively recoup their losses, they may other related markets more efficient. When lenders can effectively recoup their losses, they may
be more willing to lend to consumers at lower initial loan costs, leading to more access to credit be more willing to lend to consumers at lower initial loan costs, leading to more access to credit

for consumers. for consumers.
The U.S. debt collection market is large, and the debt collection process impacts many American consumers. As of 2020, The U.S. debt collection market is large, and the debt collection process impacts many American consumers. As of 2020,
there are nearly 7,000 collection agencies in the United States, and the industry’s annual revenue is about $13.4 billion. there are nearly 7,000 collection agencies in the United States, and the industry’s annual revenue is about $13.4 billion.
According to a Consumer Financial Protection Bureau (CFPB) survey, approximately one-third of consumers with a credit According to a Consumer Financial Protection Bureau (CFPB) survey, approximately one-third of consumers with a credit
bureau file reported being contacted by at least one creditor or debt collector trying to collect on one or more debts in the bureau file reported being contacted by at least one creditor or debt collector trying to collect on one or more debts in the
previous year. previous year.
Lenders make contracts with debt collectors to collect their debts, and consumers may not choose the debt collector with Lenders make contracts with debt collectors to collect their debts, and consumers may not choose the debt collector with
whom they engage. Therefore, consumers cannot take their business elsewhere if abuses occur. For this reason, consumer whom they engage. Therefore, consumers cannot take their business elsewhere if abuses occur. For this reason, consumer
protection laws and regulations may be particularly consequential. According to the CFPB, debt collection is the consumer protection laws and regulations may be particularly consequential. According to the CFPB, debt collection is the consumer
finance market with the second most complaints, accounting for 15% of the total complaints the agency received in 2020. finance market with the second most complaints, accounting for 15% of the total complaints the agency received in 2020.
Consumers’ most common debt collector complaints assert that a debt collector attempted to collect a debt the consumer did Consumers’ most common debt collector complaints assert that a debt collector attempted to collect a debt the consumer did
not believe was owed (49%), or a consumer received insufficient written notification about a debt (20%). not believe was owed (49%), or a consumer received insufficient written notification about a debt (20%).
The Fair Debt Collection Practices Act (FDCPA; 15 U.S.C. §§1692-1692p) is the primary federal statute regulating the The Fair Debt Collection Practices Act (FDCPA; 15 U.S.C. §§1692-1692p) is the primary federal statute regulating the
consumer debt collection market. It generally applies only to debt collectors, not the original lender. The FDCPA prohibits consumer debt collection market. It generally applies only to debt collectors, not the original lender. The FDCPA prohibits
debt collectors from engaging in certain types of conduct (such as misrepresentation or harassment) when seeking to collect debt collectors from engaging in certain types of conduct (such as misrepresentation or harassment) when seeking to collect
certain personal, family, or household debts from consumers and grants consumers the right to dispute or stop some certain personal, family, or household debts from consumers and grants consumers the right to dispute or stop some
communications about an alleged debt. In addition, the FDCPA requires that a debt collector must send to a consumer a communications about an alleged debt. In addition, the FDCPA requires that a debt collector must send to a consumer a
validation notice disclosing certain information about the debt. validation notice disclosing certain information about the debt.
Recently, the CFPB finalized two new regulations intended to clarify and update provisions in the FDCPA. On November 30, Recently, the CFPB finalized two new regulations intended to clarify and update provisions in the FDCPA. On November 30,
2020, the CFPB issued a final rule on how debt collectors may communicate with consumers. The rule generally limits debt 2020, the CFPB issued a final rule on how debt collectors may communicate with consumers. The rule generally limits debt
collector phone calls to seven times in a seven-day period and prohibits debt collectors from making calls within a week after collector phone calls to seven times in a seven-day period and prohibits debt collectors from making calls within a week after
speaking by phone to a consumer. The rule also clarifies that debt collectors can use newer technologies, such as email and speaking by phone to a consumer. The rule also clarifies that debt collectors can use newer technologies, such as email and
text messages, to communicate with consumers. Debt collectors are able to use these communication tools without limit. text messages, to communicate with consumers. Debt collectors are able to use these communication tools without limit.
However, the rule requires a reasonable and simple method for consumers to opt out of these types of messages. On January However, the rule requires a reasonable and simple method for consumers to opt out of these types of messages. On January
19, 2021, the CFPB published a second final rule clarifying what information debt collectors must disclose to consumers. At 19, 2021, the CFPB published a second final rule clarifying what information debt collectors must disclose to consumers. At
the onset of communication, it requires disclosure of certain information about the debt and consumers’ rights in the debt the onset of communication, it requires disclosure of certain information about the debt and consumers’ rights in the debt
collection process, such as how to dispute a debt. The regulation also allows a debt collector to obtain a “safe harbor” from collection process, such as how to dispute a debt. The regulation also allows a debt collector to obtain a “safe harbor” from
liability by using a model validation notice. Furthermore, the rule bars debt collectors from furnishing information about a liability by using a model validation notice. Furthermore, the rule bars debt collectors from furnishing information about a
debt to a credit bureau before communicating with the consumer about the debt by phone or mail. debt to a credit bureau before communicating with the consumer about the debt by phone or mail.
Appropriate regulation of the debt collection market has been a focus of congressional attention in the 117th Congress. Appropriate regulation of the debt collection market has been a focus of congressional attention in the 117th Congress.
Ongoing concerns about debt collection include communication frequency; time-barred and obsolete debt; validation issues; Ongoing concerns about debt collection include communication frequency; time-barred and obsolete debt; validation issues;
medical debt and credit reporting; and federal, state, and local government debt. medical debt and credit reporting; and federal, state, and local government debt. ~~The House Financial Services Committee~~
~~reported~~On May 13, 2021, the House passed the Comprehensive Debt Collection Improvement Act (H.R. 2547; H.Rept. 117-23), the Comprehensive Debt Collection Improvement Act (H.R. 2547; H.Rept. 117-23), which addresses many of these which addresses many of these
policy issues. Among other things, the bill policy issues. Among other things, the bill ~~limits~~would limit debt collectors’ email and text messages to consumers debt collectors’ email and text messages to consumers ~~; prohibits~~, prohibit consumer reporting agencies from including certain medical medical
debts related to medically necessary procedures debts related to medically necessary procedures ~~from inclusion~~ in consumer credit reportsin consumer credit reports~~; and makes federal, state, and local~~
, and make all federal and state government debts subject to the FDCPA. It government debts subject to the FDCPA. It would also provide~~also provides~~ military servicemembers additional debt collection protections. military servicemembers additional debt collection protections.

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The Debt Collection Market and Selected Policy Issues

Introduction
When a consumer defaults on a debt, a third-party debt collector or buyer (hereinafter referred to When a consumer defaults on a debt, a third-party debt collector or buyer (hereinafter referred to
as “debt collector”) often collects the debt obligation, rather than the first-party creditor or lender as “debt collector”) often collects the debt obligation, rather than the first-party creditor or lender
to whom the debt is original y owed. The debt collection market helps lenders recoup their losses to whom the debt is original y owed. The debt collection market helps lenders recoup their losses
when a consumer defaults, facilitating the resolution of delinquencies and defaults and making when a consumer defaults, facilitating the resolution of delinquencies and defaults and making
consumer credit and other related markets more efficient. consumer credit and other related markets more efficient.
The U.S. debt collection market is large, and it impacts many consumers. As of 2020, there were The U.S. debt collection market is large, and it impacts many consumers. As of 2020, there were
nearly 7,000 collection agencies in the United States, and the industry’s annual revenue was about nearly 7,000 collection agencies in the United States, and the industry’s annual revenue was about
$13.4 bil ion.1 According to a Consumer Financial Protection Bureau (CFPB) survey, $13.4 bil ion.1 According to a Consumer Financial Protection Bureau (CFPB) survey,
approximately one-third of consumers with a credit bureau file reported being contacted by at approximately one-third of consumers with a credit bureau file reported being contacted by at
least one creditor or debt collector trying to collect on one or more debts in the previous year.2 least one creditor or debt collector trying to collect on one or more debts in the previous year.2
Lenders make contracts with debt collectors to collect their debts, and consumers may not choose Lenders make contracts with debt collectors to collect their debts, and consumers may not choose
the debt collector with whom they engage. Therefore, consumers cannot take their business the debt collector with whom they engage. Therefore, consumers cannot take their business
elsewhere if abuses occur. For this reason, consumer protection laws and regulations are elsewhere if abuses occur. For this reason, consumer protection laws and regulations are
particularly important.3 According to the CFPB, debt collection is the consumer finance market particularly important.3 According to the CFPB, debt collection is the consumer finance market
with the second most complaints, accounting for 15% of the total complaints the agency received with the second most complaints, accounting for 15% of the total complaints the agency received
in 2020.4 in 2020.4
The Fair Debt Collection Practices Act (FDCPA; 15 U.S.C. §§1692-1692p) is the primary federal The Fair Debt Collection Practices Act (FDCPA; 15 U.S.C. §§1692-1692p) is the primary federal
statute regulating the consumer debt collection market. It general y applies only to debt statute regulating the consumer debt collection market. It general y applies only to debt
collectors, not the original lender. Recently, the CFPB finalized two new regulations intended to collectors, not the original lender. Recently, the CFPB finalized two new regulations intended to
clarify and update provisions in the FDCPA, including how debt collectors may communicate clarify and update provisions in the FDCPA, including how debt collectors may communicate
with consumers and what information debt collectors must disclose to consumers. with consumers and what information debt collectors must disclose to consumers.
Appropriate regulation of the debt collection market has been a focus of congressional attention Appropriate regulation of the debt collection market has been a focus of congressional attention
in the 117th Congress. in the 117th Congress. ~~The House Financial Services Committee reported~~On May 13, 2021, the House passed the Comprehensive the Comprehensive
Debt Collection Improvement Act (H.R. 2547; H.Rept. 117-23), which, among other things, Debt Collection Improvement Act (H.R. 2547; H.Rept. 117-23), which, among other things,
~~limits~~would limit debt collectors’ email and text messages to consumers debt collectors’ email and text messages to consumers~~; prohibits~~, prohibit consumer reporting agencies from including certain medical debts related to medical debts related to
medical y necessary procedures medical y necessary procedures ~~from inclusion~~ in consumer credit in consumer credit ~~reports; and makes federal,~~
~~state, and local~~ reports, and make al federal and state government debts subject to the FDCPA. It government debts subject to the FDCPA. It would also provide military servicemembers ~~also provides servicemembers~~
additional debt collection protections. additional debt collection protections.
For more information, see CRS Insight IN11678, House Passes the Comprehensive Debt Collection Improvement Act (H.R. 2547), by Cheryl R. Cooper. This report first provides an overview of the debt collection market, including consumer This report first provides an overview of the debt collection market, including consumer
experiences during the debt collection process. It then discusses the FDCPA, including the experiences during the debt collection process. It then discusses the FDCPA, including the
CFPB’s recently finalized regulations. Lastly, the report discusses selected policy issues CFPB’s recently finalized regulations. Lastly, the report discusses selected policy issues
pertaining to debt collection: communication frequency; time-barred and obsolete debt; validation pertaining to debt collection: communication frequency; time-barred and obsolete debt; validation
issues; medical debt and credit reporting; and federal, state, and local government debt. issues; medical debt and credit reporting; and federal, state, and local government debt.

1 Gabriel Schulman, 1 Gabriel Schulman, Debt Collection Agencies in the US, IBIS World, Industry Report 56144, December 2020, p. 7 , IBIS World, Industry Report 56144, December 2020, p. 7
(hereinafter Schulman, (hereinafter Schulman, Debt Collection Agencies in the US, IBIS World, 2020). , IBIS World, 2020).
2 Consumer Financial Protection Bureau (CFPB), 2 Consumer Financial Protection Bureau (CFPB), Consumer Experiences with Debt Collection: Findings from the
CFPB’s Survey of Consumer Views on Debt, January 2017, p. 5, at https://files.consumerfinance.gov/f/documents/, January 2017, p. 5, at https://files.consumerfinance.gov/f/documents/
201701_cfpb_Debt -Collection-Survey-Report.pdf (hereinafter CFPB, 201701_cfpb_Debt -Collection-Survey-Report.pdf (hereinafter CFPB, Consum er Experiences with Debt Collection). ).
3 For an overview of consumer financial markets, see CRS Report R45813, 3 For an overview of consumer financial markets, see CRS Report R45813, An Overview of Consumer Finance and
Policy Issues, by Cheryl R. Cooper. , by Cheryl R. Cooper.
4 CFPB, 4 CFPB, Consumer Response Annual Report: January 1-December 31, 2020, March 2020, p. 9, at , March 2020, p. 9, at
https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf (hereinafter https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf (hereinafter
CFPB, CFPB, Consum er Response Annual Report). ).
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link to page 6 link to page 6 The Debt Collection Market and Selected Policy Issues

Overview of Debt Collection Market
This section provides an overview of the debt collection market. It describes the market between This section provides an overview of the debt collection market. It describes the market between
creditors and debt creditors and debt ~~col ectors~~collectors and discusses debt collector operations in detail. It also addresses and discusses debt collector operations in detail. It also addresses
consumer experiences in the market, including the CFPB’s consumer complaints about the consumer experiences in the market, including the CFPB’s consumer complaints about the
industry. industry.
The Market Between Creditors and Debt Collectors
Creditors general y want to recoup their losses to the maximum extent possible after a consumer Creditors general y want to recoup their losses to the maximum extent possible after a consumer
defaults on a loan or debt. When creditors can effectively recoup their losses, they may be more defaults on a loan or debt. When creditors can effectively recoup their losses, they may be more
wil ing to lend to consumers at lower initial loan costs, leading to more access to credit for wil ing to lend to consumers at lower initial loan costs, leading to more access to credit for
consumers.5 Some creditors may choose to collect their debts themselves. However, some may consumers.5 Some creditors may choose to collect their debts themselves. However, some may
choose to contract with a debt collector because they do not want to be associated with aggressive choose to contract with a debt collector because they do not want to be associated with aggressive
collection practices,6 because debt col ectors might have a competitive advantage in collecting collection practices,6 because debt col ectors might have a competitive advantage in collecting
debt, or both.7 Although creditors have the right to use the court system to recoup their losses by debt, or both.7 Although creditors have the right to use the court system to recoup their losses by
obtaining judgments against defaulting consumers, such as wage garnishment, these legal options obtaining judgments against defaulting consumers, such as wage garnishment, these legal options
may be more costly to creditors than the debt collection process. may be more costly to creditors than the debt collection process.
Many types of industries use the debt collection market. In 2019, debt from unpaid loans or other Many types of industries use the debt collection market. In 2019, debt from unpaid loans or other
financial services accounted for close to 40% of debt collection revenue.8 The other 60% of debt financial services accounted for close to 40% of debt collection revenue.8 The other 60% of debt
collection revenue included nonfinancial services debt, such as telecommunications, utility, collection revenue included nonfinancial services debt, such as telecommunications, utility,
medical, retail, and government debts (semedical, retail, and government debts (see Figure 1).9 In 2020, financial services debts decreased ).9 In 2020, financial services debts decreased
significantly, while medical and government debts grew significantly as a proportion of revenue significantly, while medical and government debts grew significantly as a proportion of revenue
due to the COVID-19 pandemic. It is unclear if these market trends wil continue after the due to the COVID-19 pandemic. It is unclear if these market trends wil continue after the
pandemic ends.10 pandemic ends.10

5 Robert M. Hunt, 5 Robert M. Hunt, Collecting Consumer Debt in America, Federal Reserve Bank of Philadelphia, Business Review, , Federal Reserve Bank of Philadelphia, Business Review,
February 2007, at https://www.philadelphiafed.org/-/media/research-and-data/publications/business-review/2007/q2/February 2007, at https://www.philadelphiafed.org/-/media/research-and-data/publications/business-review/2007/q2/
hunt_collecting-consumer-debt.pdf (hereinafter Hunt, hunt_collecting-consumer-debt.pdf (hereinafter Hunt, Collecting Consum er Debt in Am erica, Federal Reserve Bank of , Federal Reserve Bank of
Philadelphia, 2007). Philadelphia, 2007).
6 Viktar Fedaseyeu and Robert M. Hunt, 6 Viktar Fedaseyeu and Robert M. Hunt, The Economics of Debt Collection: Enforcement of Consumer Credit
Contracts, Federal Reserve Bank of Philadelphia, Working Paper no. 18 -04, October 1, 2018, at , Federal Reserve Bank of Philadelphia, Working Paper no. 18 -04, October 1, 2018, at
https://www.philadelphiafed.org/-/media/research-and-data/publications/working-papers/2018/wp18-04r.pdf. https://www.philadelphiafed.org/-/media/research-and-data/publications/working-papers/2018/wp18-04r.pdf.
7 For more information on why a creditor might use a debt collector, see Conference of State Bank Supervisors, 7 For more information on why a creditor might use a debt collector, see Conference of State Bank Supervisors,
“Chapter Five: Overview of Debt Collection,” “Chapter Five: Overview of Debt Collection,” Reengineering NonBank Supervisors, January 2020, p. 5, at , January 2020, p. 5, at
https://www.csbs.org/system/files/2020-02/Chapter%20Five%20-https://www.csbs.org/system/files/2020-02/Chapter%20Five%20-
%20Overview%20of%20Debt%20Collection%20FINAL4.pdf (hereinafter Conference of State Bank Supervisors, %20Overview%20of%20Debt%20Collection%20FINAL4.pdf (hereinafter Conference of State Bank Supervisors,
“Chapter Five: Overview of Debt Collection,” 2020). “Chapter Five: Overview of Debt Collection,” 2020).
8 Rohan Jaura, 8 Rohan Jaura, Debt Collection Agencies in the US, IBIS World, Industry Report 56144, December 2019, p.16 , IBIS World, Industry Report 56144, December 2019, p.16
(hereinafter Jaura, (hereinafter Jaura, Debt Collection Agencies in the US, IBIS World, 2019). , IBIS World, 2019).
9 Jaura, 9 Jaura, Debt Collection Agencies in the US, IBIS World, 2019, p. 16. , IBIS World, 2019, p. 16.
10 Schulman, 10 Schulman, Debt Collection Agencies in the US, IBIS World, 2020, pp. 19-21. , IBIS World, 2020, pp. 19-21.
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Figure 1. Debt Collection Major Market Segmentation by 2019 Share of Revenue

Source: Rohan Jaura, Rohan Jaura, Debt Col ection Agencies in the US, IBIS World, Industry Report 56144, December 2019, , IBIS World, Industry Report 56144, December 2019,
p. 16. p. 16.
Debt collectors typical y either contract with the original creditor to receive a share of any Debt collectors typical y either contract with the original creditor to receive a share of any
amount collected on behalf of the original lender or buy the debt obligation in full.11 CFPB amount collected on behalf of the original lender or buy the debt obligation in full.11 CFPB
research suggests that buying the debt obligation in full has declined in the past decade,12 and research suggests that buying the debt obligation in full has declined in the past decade,12 and
most debt collectors now operate by receiving a share of the amount collected on behalf of the most debt collectors now operate by receiving a share of the amount collected on behalf of the
original lender.13 Creditors may choose among thousands of debt collector companies to contract original lender.13 Creditors may choose among thousands of debt collector companies to contract
with to collect or sel their consumer debts.14 The CFPB estimates that about 95% of companies with to collect or sel their consumer debts.14 The CFPB estimates that about 95% of companies
operating in this market are smal businesses.15 However, in the past few decades, the debt operating in this market are smal businesses.15 However, in the past few decades, the debt
collection market has experienced consolidation due to new technologies, such as automated cal collection market has experienced consolidation due to new technologies, such as automated cal
center systems, which have made this industry more efficient and led to greater economies of center systems, which have made this industry more efficient and led to greater economies of
scale.16 Larger debt collection companies may be better positioned to handle higher volumes from scale.16 Larger debt collection companies may be better positioned to handle higher volumes from
larger companies and increased regulatory compliance burdens.17 larger companies and increased regulatory compliance burdens.17
Debt collectors can cal , send letters, and use other methods to contact consumers to collect an Debt collectors can cal , send letters, and use other methods to contact consumers to collect an
al eged debt. In general, debt collectors expect to collect only a fraction of the face value of any al eged debt. In general, debt collectors expect to collect only a fraction of the face value of any
particular debt, knowing that some consumers wil never pay back their debts in full. Therefore, particular debt, knowing that some consumers wil never pay back their debts in full. Therefore,

11 CFPB, 11 CFPB, Fair Debt Collection Practices Act, March 2021, pp. 14-15, at https://files.consumerfinance.gov/f/documents/, March 2021, pp. 14-15, at https://files.consumerfinance.gov/f/documents/
cfpb_fdcpa_annual-report -congress_03-2021.pdf (hereinafter CFPB, cfpb_fdcpa_annual-report -congress_03-2021.pdf (hereinafter CFPB, Fair Debt Collection Practices Act). Some states ). Some states
have debt collection licensing requirements, although there is no licensing requirement at the federal level. See have debt collection licensing requirements, although there is no licensing requirement at the federal level. See
Conference of State Bank Supervisors, “ Chapter Five: Overview of Debt Collection ,” 2020, pp. 4-16, 18-19. Conference of State Bank Supervisors, “ Chapter Five: Overview of Debt Collection ,” 2020, pp. 4-16, 18-19.
12 CFPB, 12 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, July 2019, p. 10, at , July 2019, p. 10, at
https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf (hereinafter CFPB, https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf (hereinafter CFPB,
Market Snapshot: Third-Party Debt Collections Tradeline Reporting ). ).
13 CFPB, 13 CFPB, Fair Debt Collection Practices Act, pp. 14-15. , pp. 14-15.
14 Jaura, 14 Jaura, Debt Collection Agencies in the US, IBIS World, 2019, p. 4. , IBIS World, 2019, p. 4.
15 CFPB, “Debt Collection Practices (Regulation F),” 8415 CFPB, “Debt Collection Practices (Regulation F),” 84 Federal Register 23392-23393, May 21, 2019. 23392-23393, May 21, 2019.
16 Hunt, 16 Hunt, Collecting Consumer Debt in America, Federal Reserve Bank of Philadelphia, 2007. , Federal Reserve Bank of Philadelphia, 2007.
17 Jaura, 17 Jaura, Debt Collection Agencies in the US, IBIS World, 2019, p. 11. , IBIS World, 2019, p. 11.
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when a debt collector contacts a consumer, both parties can negotiate the amount and payment when a debt collector contacts a consumer, both parties can negotiate the amount and payment
schedule of the debt.18 schedule of the debt.18
If a consumer does not settle a debt, the debt owner often has several options, such as seizing the If a consumer does not settle a debt, the debt owner often has several options, such as seizing the
collateral for secured loans (e.g., car, home)19 or garnishing a consumer’s wages after obtaining a collateral for secured loans (e.g., car, home)19 or garnishing a consumer’s wages after obtaining a
court order. According to CFPB research, “the cost of filing a claim plays a large role in litigation court order. According to CFPB research, “the cost of filing a claim plays a large role in litigation
decisions and varies significantly across jurisdictions based on differences in factors such as decisions and varies significantly across jurisdictions based on differences in factors such as
filing fees and what types of collections claims can be brought in smal claims court.”20 More filing fees and what types of collections claims can be brought in smal claims court.”20 More
than half of filed suits lead to default judgments in favor of the debt owner, often because than half of filed suits lead to default judgments in favor of the debt owner, often because
consumers fail to appear in court.21 According to a CFPB consumer survey, about 15% of those consumers fail to appear in court.21 According to a CFPB consumer survey, about 15% of those
contacted about a debt were sued in the past year.22 Of those sued, a fraction—about a quarter—contacted about a debt were sued in the past year.22 Of those sued, a fraction—about a quarter—
of consumers reported attending the court hearing.23 of consumers reported attending the court hearing.23

18 CFPB, “ What is the Best Way to Negotiate a Settlement With a Debt Collector?” March 29, 2019, at 18 CFPB, “ What is the Best Way to Negotiate a Settlement With a Debt Collector?” March 29, 2019, at
https://www.consumerfinance.gov/ask-cfpb/what -is-the-best-way-to-negotiate-a-settlement-with-a-debt-collector-en-https://www.consumerfinance.gov/ask-cfpb/what -is-the-best-way-to-negotiate-a-settlement-with-a-debt-collector-en-
1447/. 1447/.
19 Legal processes are in place to seize collateral for secured loans, such as foreclosure or car repossession. 19 Legal processes are in place to seize collateral for secured loans, such as foreclosure or car repossession.
20 CFPB, 20 CFPB, Study of Third-Party Debt Collection Operations, July 2016, p. 18, at https://files.consumerfinance.gov/f/, July 2016, p. 18, at https://files.consumerfinance.gov/f/
documents/20160727_cfpb_Third_Party_Debt_Collection_Operations_Study.pdf (hereinafter CFPB, documents/20160727_cfpb_Third_Party_Debt_Collection_Operations_Study.pdf (hereinafter CFPB, Study of Third-
Party Debt Collection Operations). ).
21 CFPB, 21 CFPB, Study of Third-Party Debt Collection Operations, p. 18. , p. 18.
22 CFPB, 22 CFPB, Consumer Experiences with Debt Collection, p. 5. , p. 5.
23 CFPB, 23 CFPB, Consumer Experiences with Debt Collection, p. 5. , p. 5.
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Debt Collection and Credit Reporting
Many financial institutions furnish information Many financial institutions furnish information about their customers’ payment histories to credit bureaus.24 Credit about their customers’ payment histories to credit bureaus.24 Credit
bureaus (or credit reporting agencies) col ect and subsequently provide consumer information to firms, which use bureaus (or credit reporting agencies) col ect and subsequently provide consumer information to firms, which use
this information to screen for consumer risks. For example, lenders rely on credit reports and scores to this information to screen for consumer risks. For example, lenders rely on credit reports and scores to
determine the likelihood that prospective borrowers wil repay their loans before entering into a financial determine the likelihood that prospective borrowers wil repay their loans before entering into a financial
relationship with those consumers. relationship with those consumers.
Debt col ectors are not required (but they may choose) to furnish information about debts to credit bureaus. For Debt col ectors are not required (but they may choose) to furnish information about debts to credit bureaus. For
financial services debts, lenders may have already reported to the credit bureaus that a consumer defaulted on the financial services debts, lenders may have already reported to the credit bureaus that a consumer defaulted on the
debt before debt col ection begins. For nonfinancial debts, creditors are often less likely to report this information. debt before debt col ection begins. For nonfinancial debts, creditors are often less likely to report this information.
According to the Consumer Financial Protection Bureau (CFPB), debt col ectors frequently choose not to furnish According to the Consumer Financial Protection Bureau (CFPB), debt col ectors frequently choose not to furnish
information to credit bureaus due to costs and potential legal liability, but most debt col ectors furnish information information to credit bureaus due to costs and potential legal liability, but most debt col ectors furnish information
occasional y.25 General y, debt buyers who buy debt obligations in ful are more likely to report debts to credit occasional y.25 General y, debt buyers who buy debt obligations in ful are more likely to report debts to credit
bureaus.26 Debts can general y be reported in a consumer’s credit record for seven years. A debt is considered bureaus.26 Debts can general y be reported in a consumer’s credit record for seven years. A debt is considered
obsolete when it can no longer be included in a consumer’s credit report. when it can no longer be included in a consumer’s credit report.
Over one-fourth of consumers have a debt col ection on their credit report.27 Past-due medical bil s, credit cards, Over one-fourth of consumers have a debt col ection on their credit report.27 Past-due medical bil s, credit cards,
and student loans were the most common types of debts on credit records.28 According to the CFPB, those and student loans were the most common types of debts on credit records.28 According to the CFPB, those
contacted about credit card and student loan debts differed more across demographic characteristics and credit contacted about credit card and student loan debts differed more across demographic characteristics and credit
scores than those contacted about medical debt.29 Some debt col ectors engage in scores than those contacted about medical debt.29 Some debt col ectors engage in passive col ections—reporting a —reporting a
debt to a credit reporting agency and waiting for the consumer to discover and pay back the debt—rather than debt to a credit reporting agency and waiting for the consumer to discover and pay back the debt—rather than
spending resources actively col ecting the debt from consumers. The practice of passive col ections is spending resources actively col ecting the debt from consumers. The practice of passive col ections is
controversial, and the CFPB suggests that it may not affect many consumers.30 controversial, and the CFPB suggests that it may not affect many consumers.30
Debt col ections are disputed with credit bureaus at a greater rate than other types of credit report information.31 Debt col ections are disputed with credit bureaus at a greater rate than other types of credit report information.31
This could be for many reasons. For example, debt col ection information is more likely to negatively affect a This could be for many reasons. For example, debt col ection information is more likely to negatively affect a
consumer’s credit record. In addition, this information may tend to be less accurate than other credit report consumer’s credit record. In addition, this information may tend to be less accurate than other credit report
information. According to a CFPB survey, more than half of consumers who had been contacted about a debt in information. According to a CFPB survey, more than half of consumers who had been contacted about a debt in
col ection reported an error relating to at least one such debt,32 and about a quarter disputed the debt with the col ection reported an error relating to at least one such debt,32 and about a quarter disputed the debt with the
debt col ector.33 Although consumers’ demographics were not correlated with citing an issue with an al eged debt, debt col ector.33 Although consumers’ demographics were not correlated with citing an issue with an al eged debt,
older, wealthier, and higher credit quality consumers were more likely to report disputing the debt.34 older, wealthier, and higher credit quality consumers were more likely to report disputing the debt.34
Consumer Experiences
Many consumers in the United States experience the debt collection process.35 According to a Many consumers in the United States experience the debt collection process.35 According to a
2014-2015 CFPB survey, about one-third of consumers with a credit bureau file reported being 2014-2015 CFPB survey, about one-third of consumers with a credit bureau file reported being
contacted in the last year by at least one creditor or collector trying to contacted in the last year by at least one creditor or collector trying to ~~c ollect~~collect on one or more on one or more

24 For more information on the credit reporting system, see CRS Report R44125, 24 For more information on the credit reporting system, see CRS Report R44125, Consumer Credit Reporting, Credit
Bureaus, Credit Scoring, and Related Policy Issues, by Cheryl R. Cooper and Darryl E. Getter. , by Cheryl R. Cooper and Darryl E. Getter.
25 CFPB, 25 CFPB, Study of Third-Party Debt Collection Operations, p. 19. , p. 19.
26 CFPB, 26 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, p. 5. , p. 5.
27 CFPB, 27 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, pp. 5-7. For more information about the , pp. 5-7. For more information about the
geography of consumers with delinquent debt across the United States, see Urban Institute, “ Debt in America: An geography of consumers with delinquent debt across the United States, see Urban Institute, “ Debt in America: An
Interactive Map,” last updated December 17, 2019, at https://apps.urban.org/features/debt-interactive-map/?type=Interactive Map,” last updated December 17, 2019, at https://apps.urban.org/features/debt-interactive-map/?type=
overall&variable=pct_debt_collections. overall&variable=pct_debt_collections.
28 CFPB, 28 CFPB, Consumer Experiences with Debt Collection, p. 5. , p. 5.
29 CFPB, 29 CFPB, Consumer Experiences with Debt Collection, p. 5. , p. 5.
30 CFPB, 30 CFPB, Consumer Experiences with Debt Collection, pp. 14-15. , pp. 14-15.
31 CFPB, 31 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, p. 14. , p. 14.
32 CFPB, 32 CFPB, Consumer Experiences with Debt Collection,, p. 24. p. 24.
33 CFPB, 33 CFPB, Consumer Experiences with Debt Collection, p. 5. , p. 5.
34 CFPB, 34 CFPB, Consumer Experiences with Debt Collection, p. 25. , p. 25.
35 For resources for consumers having trouble paying their debts, see CFPB, “ Debt Collection: Consumer T ools,” at 35 For resources for consumers having trouble paying their debts, see CFPB, “ Debt Collection: Consumer T ools,” at
https://www.consumerfinance.gov/consumer-tools/debt-collection/. https://www.consumerfinance.gov/consumer-tools/debt-collection/.
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debts.36 Consumers with lower incomes and nonprime credit scores were more likely to report debts.36 Consumers with lower incomes and nonprime credit scores were more likely to report
experiences with debt collection than consumers with higher incomes and prime credit scores.37 experiences with debt collection than consumers with higher incomes and prime credit scores.37
In addition, over 40% of consumers reported tel ing a collector to stop contacting them, and of In addition, over 40% of consumers reported tel ing a collector to stop contacting them, and of
those consumers, about a quarter reported that the contact stopped after their request.38 those consumers, about a quarter reported that the contact stopped after their request.38
According to the CFPB, consumer complaints about debt collection accounted for 15% of the According to the CFPB, consumer complaints about debt collection accounted for 15% of the
total complaints it received in 2020.39 The most common such complaints asserted that a debt total complaints it received in 2020.39 The most common such complaints asserted that a debt
collector attempted to collect a debt the consumer did not believe was owed (49%), or a consumer collector attempted to collect a debt the consumer did not believe was owed (49%), or a consumer
received insufficient written notification about a debt (20%) (s received insufficient written notification about a debt (20%) (see Table 1).40 .40
Table 1. Types of Debt Collection Complaints Reported by Consumers in 2020
Types of Complaints
% of Debt Collection Complaints
Attempts to col ect debt not owed Attempts to col ect debt not owed
49% 49%
Complaints about written notification about the debt Complaints about written notification about the debt
20% 20%
Negative or legal actions or threats to take such actions Negative or legal actions or threats to take such actions
10% 10%
False statements or representations False statements or representations
10% 10%
Complaints about communication tactics Complaints about communication tactics
8% 8%
Threats to contact someone or share information improperly Threats to contact someone or share information improperly
2% 2%
Source: Consumer Financial Protection Bureau, Consumer Financial Protection Bureau, Fair Debt Col ection Practices Act, March 2021, p. 19, at , March 2021, p. 19, at
https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2021.pdf. https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2021.pdf.
Consumers who cannot pay their debts may turn to the federal bankruptcy process, which is Consumers who cannot pay their debts may turn to the federal bankruptcy process, which is
general y governed by the Bankruptcy Code.41 In general, the bankruptcy process al ows a general y governed by the Bankruptcy Code.41 In general, the bankruptcy process al ows a
consumer to enter a court-administered proceeding to discharge certain debts and obtain a fresh consumer to enter a court-administered proceeding to discharge certain debts and obtain a fresh
start. However, consumers may face negative repercussions by choosing bankruptcy (e.g., a lower start. However, consumers may face negative repercussions by choosing bankruptcy (e.g., a lower
credit score and reduced access to credit for several years afterward). In 2005, Congress passed credit score and reduced access to credit for several years afterward). In 2005, Congress passed
the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA; P.L. 109-8) in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA; P.L. 109-8) in
response to what some perceived as a high number of consumer bankruptcy filings and concerns response to what some perceived as a high number of consumer bankruptcy filings and concerns
about some consumers abusing the system. BAPCPA made numerous amendments to the about some consumers abusing the system. BAPCPA made numerous amendments to the
Bankruptcy Code. One change was to impose a “means test” to determine when consumers have Bankruptcy Code. One change was to impose a “means test” to determine when consumers have
the financial ability to pay their debts in instal ments over several years, rather than receiving the financial ability to pay their debts in instal ments over several years, rather than receiving
more immediate relief from their debts.42 more immediate relief from their debts.42

36 CFPB, 36 CFPB, Consumer Experiences with Debt Collection, p. 5. , p. 5.
37 CFPB, 37 CFPB, Consumer Experiences with Debt Collection, pp. 15-16. , pp. 15-16.
38 CFPB, 38 CFPB, Consumer Experiences with Debt Collection,, p. 5. p. 5.
39 CFPB, 39 CFPB, Consumer Response Annual Report, p. 9. Debt collection was the eighth most complained about industry to , p. 9. Debt collection was the eighth most complained about industry to
the Federal T rade Commission (FT C), accounting for 2.55% of all complaints in 2020. See FT C, the Federal T rade Commission (FT C), accounting for 2.55% of all complaints in 2020. See FT C, Consum er Sentinel
Network: Data Book 2020, February 2020, p. 7, at https://www.ftc.gov/system/files/documents/reports/consumer-, February 2020, p. 7, at https://www.ftc.gov/system/files/documents/reports/consumer-
sentinel-network-data-book-2020/csn_annual_data_book_2020.pdf. sentinel-network-data-book-2020/csn_annual_data_book_2020.pdf.
40 CFPB, 40 CFPB, Fair Debt Collection Practices Act, p. 19. T he, p. 19. T he “ T he Fair Debt Collection Practices Act ” section of this report ” section of this report
discusses written notification requirements in detail. discusses written notification requirements in detail.
41 11 U.S.C. §§101-1532. For more information on the bankruptcy process, see CRS Report R45137, 41 11 U.S.C. §§101-1532. For more information on the bankruptcy process, see CRS Report R45137, Bankruptcy
Basics: A Prim er, by Kevin M. Lewis. , by Kevin M. Lewis.
42 11 U.S.C. §707(b) provides the following: 42 11 U.S.C. §707(b) provides the following:
After notice and a hearing, the court, on its own motion or on a motion by the United States trustee, After notice and a hearing, the court, on its own motion or on a motion by the United States trustee,
trustee (or bankruptcy administrator, if any), or any party in interest, may dismiss a case filed by an trustee (or bankruptcy administrator, if any), or any party in interest, may dismiss a case filed by an
individual debtor under this chapter whose debts are primarily consumer debts, or, with the debtor’s individual debtor under this chapter whose debts are primarily consumer debts, or, with the debtor’s
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In addition to the federal bankruptcy process, many states limit the length of time consumers can In addition to the federal bankruptcy process, many states limit the length of time consumers can
be sued on a debt, cal ed be sued on a debt, cal ed time-barred debt.43 Different states have different time-barred debt rules, .43 Different states have different time-barred debt rules,
but general y, most fal between three and six years.44 Therefore, some consumers may have their but general y, most fal between three and six years.44 Therefore, some consumers may have their
debts age past the statute of limitations, even if they do not go through the bankruptcy process.45 debts age past the statute of limitations, even if they do not go through the bankruptcy process.45
This result is sometimes referred to as This result is sometimes referred to as informal bankruptcy. Even though consumers are no . Even though consumers are no
longer able to be sued on time-barred debts, debt collectors in most states can continue to collect longer able to be sued on time-barred debts, debt collectors in most states can continue to collect
on these debts. In addition, in many states, debts can be revived if certain conditions are met. For on these debts. In addition, in many states, debts can be revived if certain conditions are met. For
example, in some states, if a consumer makes a partial payment on a debt or acknowledges it in example, in some states, if a consumer makes a partial payment on a debt or acknowledges it in
writing, a debt collector can sue on the debt after the statute of limitations has expired. writing, a debt collector can sue on the debt after the statute of limitations has expired.
Debt Relief Companies and Credit Counseling Agencies
Debt relief companies and credit counseling agencies provide services to help consumers manage unsecured Debt relief companies and credit counseling agencies provide services to help consumers manage unsecured
debt.46 These organizations can be nonprofit or for-profit companies. Two common types of debt relief services debt.46 These organizations can be nonprofit or for-profit companies. Two common types of debt relief services
are are debt consolidation (consolidating debts into one larger consumer loan) and (consolidating debts into one larger consumer loan) and debt management plans (working (working
with creditors to gain concessions, such as waiving fees and lowering interest rates, to make it easier for with creditors to gain concessions, such as waiving fees and lowering interest rates, to make it easier for
consumers to pay back creditors). Related services, such as financial education, are often offered by these types of consumers to pay back creditors). Related services, such as financial education, are often offered by these types of
organizations. organizations.
Debt settlements are agreements between the creditor and consumer to resolve the debt for less than the ful are agreements between the creditor and consumer to resolve the debt for less than the ful
balance owed. These settlements are sometimes arranged directly between creditors and consumers and are balance owed. These settlements are sometimes arranged directly between creditors and consumers and are
sometimes managed by debt relief companies. Consumer Financial Protection Bureau data suggest a growth in sometimes managed by debt relief companies. Consumer Financial Protection Bureau data suggest a growth in
debt settlements in recent years.47 debt settlements in recent years.47
A consumer protection concern in this market is whether consumers understand their options and the services A consumer protection concern in this market is whether consumers understand their options and the services
they are paying for. In recent years, the federal government has implemented new regulations on these they are paying for. In recent years, the federal government has implemented new regulations on these
organizations. In 2006, Congress created standards for nonprofit credit counseling agencies, such as reasonable organizations. In 2006, Congress created standards for nonprofit credit counseling agencies, such as reasonable
fees, bans on the provision of loans, and limits on the ability to financial y gain from services provided to fees, bans on the provision of loans, and limits on the ability to financial y gain from services provided to
consumers.48 In 2010, the Federal Trade Commission issued a final rule that bans for-profit debt relief companies consumers.48 In 2010, the Federal Trade Commission issued a final rule that bans for-profit debt relief companies
from charging a fee before providing their services to consumers.49 It also requires disclosures and prohibits from charging a fee before providing their services to consumers.49 It also requires disclosures and prohibits
misrepresentations when telemarketing debt relief services to consumers. Given the industry’s growth in recent misrepresentations when telemarketing debt relief services to consumers. Given the industry’s growth in recent
years, debate continues around its appropriate regulation.50 years, debate continues around its appropriate regulation.50
The Fair Debt Collection Practices Act51
Robust debt collection markets may benefit consumers by expanding access to credit, but they Robust debt collection markets may benefit consumers by expanding access to credit, but they
could also harm consumers. Creditors who rely on relationships with consumers for future could also harm consumers. Creditors who rely on relationships with consumers for future

consent, convert such a case to a case under chapter 11 or 13 of this title, if it finds that the granting consent, convert such a case to a case under chapter 11 or 13 of this title, if it finds that the granting
of relief would be an abuse of the provisions of this chapter. of relief would be an abuse of the provisions of this chapter.
43 FT C, “T ime-Barred Debts,” July 2013, at https://www.consumer.ftc.gov/articles/0117-time-barred-debts. 43 FT C, “T ime-Barred Debts,” July 2013, at https://www.consumer.ftc.gov/articles/0117-time-barred-debts.
44 FT C, 44 FT C, The Structure and Practices of the Debt Buying Industry, January 2013, p. 42, at https://www.ftc.gov/sites/, January 2013, p. 42, at https://www.ftc.gov/sites/
default/files/documents/reports/structure-and-practices-debt-buying-industry/debtbuyingreport.pdf. default/files/documents/reports/structure-and-practices-debt-buying-industry/debtbuyingreport.pdf.
45 T he debtor remains legally obligated to pay the debt, however, the debt collector can no longer resort to legally 45 T he debtor remains legally obligated to pay the debt, however, the debt collector can no longer resort to legally
enforceable actions. Seeenforceable actions. See Midland Funding, LLC v. Johnson, 137 1407 1411-1420 (S.Ct. 2017). Midland Funding, LLC v. Johnson, 137 1407 1411-1420 (S.Ct. 2017).
46 Conference of State Bank Supervisors, “ Chapter Five: Overview of Debt Collection,” 2020, pp. 3, 6. 46 Conference of State Bank Supervisors, “ Chapter Five: Overview of Debt Collection,” 2020, pp. 3, 6.
47 Christa Gibbs et al., 47 Christa Gibbs et al., Recent Trends in Debt Settlement and Credit Counseling, CFPB, Quarterly Consumer Credit , CFPB, Quarterly Consumer Credit
T rends, July 2020, at https://files.consumerfinance.gov/f/documents/cfpb_quarterly-consumer-credit-trends_debt -T rends, July 2020, at https://files.consumerfinance.gov/f/documents/cfpb_quarterly-consumer-credit-trends_debt -
settlement -credit -counseling_2020-07.pdf. settlement -credit -counseling_2020-07.pdf.
48 P.L. 109-280, §1220. 48 P.L. 109-280, §1220.
49 FT C, “T elemarketing Sales Rule,” 7549 FT C, “T elemarketing Sales Rule,” 75 Federal Register 48458-48523, August 10, 2010. 48458-48523, August 10, 2010.
50 CFPB, “ Evolutions in Consumer Debt Relief,” March 10, 2020, at https://www.consumerfinance.gov/about-us/50 CFPB, “ Evolutions in Consumer Debt Relief,” March 10, 2020, at https://www.consumerfinance.gov/about-us/
events/archive-past-events/evolutions-in-consumer-debt-relief-event/. events/archive-past-events/evolutions-in-consumer-debt-relief-event/.
51 For more information about the Fair Debt Collection Practices Act (51 For more information about the Fair Debt Collection Practices Act (~~FDCP A~~FDCPA), see CRS In Focus IF11247, ), see CRS In Focus IF11247, The Fair
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business may care more about maintaining their reputations when collecting on a debt than debt business may care more about maintaining their reputations when collecting on a debt than debt
collectors who contract with creditors rather than consumers. Consumers do not have the ability collectors who contract with creditors rather than consumers. Consumers do not have the ability
to choose the debt collector with whom they engage and are unable to take their business to choose the debt collector with whom they engage and are unable to take their business
elsewhere if abuses occur. In this way, the debt col ection market does not provide an economic elsewhere if abuses occur. In this way, the debt col ection market does not provide an economic
incentive to provide good service to consumers, as in other consumer markets. For this reason, incentive to provide good service to consumers, as in other consumer markets. For this reason,
consumer protection laws and regulations may be particularly consequential. consumer protection laws and regulations may be particularly consequential.
The FDCPA is the primary federal statute regulating the consumer debt collection market.52 The FDCPA is the primary federal statute regulating the consumer debt collection market.52
Congress passed the FDCPA in 1977 to “eliminate abusive debt collection practices by debt Congress passed the FDCPA in 1977 to “eliminate abusive debt collection practices by debt
collectors.”53 The law general y applies only to debt collectors, not the original creditors.54 It collectors.”53 The law general y applies only to debt collectors, not the original creditors.54 It
prohibits debt collectors from engaging in certain types of conduct when seeking to collect certain prohibits debt collectors from engaging in certain types of conduct when seeking to collect certain
debts from consumers, such as engaging in harassment or abuse55 or making false or misleading debts from consumers, such as engaging in harassment or abuse55 or making false or misleading
representations.56 The FDCPA limits when and how a debt collector communicates with a representations.56 The FDCPA limits when and how a debt collector communicates with a
consumer, such as limits on communications at “unusual time[s] or place[s],”57 and grants consumer, such as limits on communications at “unusual time[s] or place[s],”57 and grants
consumers the right to dispute58 or stop certain communications about an al eged debt.59 consumers the right to dispute58 or stop certain communications about an al eged debt.59
Moreover, the FDCPA requires that a debt collector must send a consumer a validation notice, Moreover, the FDCPA requires that a debt collector must send a consumer a validation notice,
which is to disclose certain information about the debt to the consumer, within five days of the which is to disclose certain information about the debt to the consumer, within five days of the
initial communication.60 initial communication.60
In 2010, the Dodd-Frank Wal Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. In 2010, the Dodd-Frank Wal Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L.
111-203) granted the CFPB authority over the FDCPA and became the first federal agency to be 111-203) granted the CFPB authority over the FDCPA and became the first federal agency to be
able to write regulations to implement the FDCPA.61 It also grants the CFPB authority over those able to write regulations to implement the FDCPA.61 It also grants the CFPB authority over those
who collect debt related to a consumer financial product service, as defined in the Dodd-Frank who collect debt related to a consumer financial product service, as defined in the Dodd-Frank
Act. The rest of this section discusses the CFPB’s supervision and enforcement of the FDCPA. Act. The rest of this section discusses the CFPB’s supervision and enforcement of the FDCPA.
This section also discusses the CFPB’s active proposed rulemaking related to the debt collection This section also discusses the CFPB’s active proposed rulemaking related to the debt collection
market, including its intention to clarify and update provisions in the FDCPA. market, including its intention to clarify and update provisions in the FDCPA.
Supervision and Enforcement
The federal government supervises and enforces the debt collection market for compliance with The federal government supervises and enforces the debt collection market for compliance with
relevant laws, such as the FDCPA. The CFPB has supervisory authority, or the authority to relevant laws, such as the FDCPA. The CFPB has supervisory authority, or the authority to
conduct examinations, over nonbank firms with more than $10 mil ion in annual receipts from conduct examinations, over nonbank firms with more than $10 mil ion in annual receipts from
consumer debt collection activities. Both the Federal Trade Commission (FTC) and the CFPB can consumer debt collection activities. Both the Federal Trade Commission (FTC) and the CFPB can

Debt Collection Practices Act: Legal Fram ework, by Kevin M. Lewis. , by Kevin M. Lewis.
52 15 U.S.C. §1692a. T he law only includes consumer debts “primarily for personal, family, or household purposes.” 52 15 U.S.C. §1692a. T he law only includes consumer debts “primarily for personal, family, or household purposes.”
53 15 U.S.C. §1692. 53 15 U.S.C. §1692.
54 15 U.S.C. §1692a. T he FDCPA can apply to a creditor collecting its own debts using a different name. Some 54 15 U.S.C. §1692a. T he FDCPA can apply to a creditor collecting its own debts using a different name. Some
creditors audit t heir debt collectors in terms of compliance with federal and state law. For more information on auditing creditors audit t heir debt collectors in terms of compliance with federal and state law. For more information on auditing
practices of debt collectors, see CFPB, practices of debt collectors, see CFPB, Study of Third-Party Debt Collection Operations, pp. 20-21. , pp. 20-21.
55 15 U.S.C. §1692d. 55 15 U.S.C. §1692d.
56 15 U.S.C. §1692e. 56 15 U.S.C. §1692e.
57 15 U.S.C. §1692c(a)(1). 57 15 U.S.C. §1692c(a)(1).
58 15 U.S.C. §1692g(b). 58 15 U.S.C. §1692g(b).
59 15 U.S.C. §1692c(c). For exceptions to this rule, see 15 U.S.C. §1692c(c)(1)-(3). 59 15 U.S.C. §1692c(c). For exceptions to this rule, see 15 U.S.C. §1692c(c)(1)-(3).
60 15 U.S.C. §1692g(a). 60 15 U.S.C. §1692g(a).
61 See P.L. 111-203, §1002 and §1011. For more information on the CFPB’s authorities, see CRS In Focus IF10031, 61 See P.L. 111-203, §1002 and §1011. For more information on the CFPB’s authorities, see CRS In Focus IF10031,
Introduction to Financial Services: The Consum er Financial Protection Bureau (CFPB) , by Cheryl R. Cooper and , by Cheryl R. Cooper and
David H. Carpenter. David H. Carpenter.
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enforce FDCPA provisions.62 The FDCPA also establishes a private right of action for consumers enforce FDCPA provisions.62 The FDCPA also establishes a private right of action for consumers
to sue on their own behalf.63 to sue on their own behalf.63
Recently, the debt collection market has been an active area for the CFPB and the FTC. The Recently, the debt collection market has been an active area for the CFPB and the FTC. The
CFPB is required to report annual y on the “administration of its functions” relating to the CFPB is required to report annual y on the “administration of its functions” relating to the
FDCPA. In FY2020, the CFPB found three patterns in its supervisory activities: (1) false FDCPA. In FY2020, the CFPB found three patterns in its supervisory activities: (1) false
litigation threats and misrepresentations regarding litigation, (2) the false implication that a debt litigation threats and misrepresentations regarding litigation, (2) the false implication that a debt
could be reported to credit reporting agencies, and (3) a false representation that a debt collector could be reported to credit reporting agencies, and (3) a false representation that a debt collector
is a credit reporting agency.64 In FY2020, the CFPB and the FTC also announced, filed, or is a credit reporting agency.64 In FY2020, the CFPB and the FTC also announced, filed, or
resolved 11 debt collection enforcement actions.65 In addition, the CFPB and the FTC conducted resolved 11 debt collection enforcement actions.65 In addition, the CFPB and the FTC conducted
education and outreach to the public about consumer rights and responsibilities in the debt education and outreach to the public about consumer rights and responsibilities in the debt
collection market under relevant laws.66 collection market under relevant laws.66
Consumer Financial Protection Bureau Rulemaking
The CFPB recently finalized two new regulations to regulate the debt collection market.67 On The CFPB recently finalized two new regulations to regulate the debt collection market.67 On
November 30, 2020, the CFPB issued a final rule on how debt collectors may communicate with November 30, 2020, the CFPB issued a final rule on how debt collectors may communicate with
consumers.68 On January 19, 2021, the CFPB published a second rule clarifying what information consumers.68 On January 19, 2021, the CFPB published a second rule clarifying what information
debt collectors must disclose to consumers.69 The following sections describe selected provisions debt collectors must disclose to consumers.69 The following sections describe selected provisions
of the CFPB’s two regulations. of the CFPB’s two regulations.
First Rule: Communication
The CFPB’s first regulation general y seeks to clarify appropriate communication tactics for debt The CFPB’s first regulation general y seeks to clarify appropriate communication tactics for debt
collectors. The rule sets standards on contact frequency, general y limiting debt collector phone collectors. The rule sets standards on contact frequency, general y limiting debt collector phone
cal s to seven times in a seven-day period. It would also prohibit debt collectors from making cal s to seven times in a seven-day period. It would also prohibit debt collectors from making
cal s within a week after speaking by phone to a consumer. The rule also clarifies that debt cal s within a week after speaking by phone to a consumer. The rule also clarifies that debt
collectors can use newer technologies, such as email and text messages, to communicate with collectors can use newer technologies, such as email and text messages, to communicate with
consumers. Debt collectors are able to use these communication tools without limit. However, the consumers. Debt collectors are able to use these communication tools without limit. However, the
rule requires a reasonable and simple method for consumers to opt out of these types of messages. rule requires a reasonable and simple method for consumers to opt out of these types of messages.
Second Rule: Disclosure
The CFPB’s second regulation clarifies the information a debt collector must include in the The CFPB’s second regulation clarifies the information a debt collector must include in the
validation notice it sends to a consumer at the onset of communication. It requires disclosure of validation notice it sends to a consumer at the onset of communication. It requires disclosure of
certain information about the debt and consumers’ rights in the debt collection process, such as certain information about the debt and consumers’ rights in the debt collection process, such as
how to dispute a debt. The regulation also al ows a debt collector to obtain a “safe harbor” from how to dispute a debt. The regulation also al ows a debt collector to obtain a “safe harbor” from
liability by using a model validation notice.70 In addition, the rule bars debt collectors from liability by using a model validation notice.70 In addition, the rule bars debt collectors from

62 15 U.S.C. §1692l(a)-(b). 62 15 U.S.C. §1692l(a)-(b).
63 15 U.S.C. §1692k. 63 15 U.S.C. §1692k.
64 CFPB, 64 CFPB, Fair Debt Collection Practices Act, pp. 23-24. , pp. 23-24.
65 CFPB, 65 CFPB, Fair Debt Collection Practices Act, pp. 29-37. , pp. 29-37.
66 CFPB, 66 CFPB, Fair Debt Collection Practices Act, pp. 38-45. , pp. 38-45.
67 For an overview of the CFPB’s two new debt collection regulations, see CRS Insight IN11590, 67 For an overview of the CFPB’s two new debt collection regulations, see CRS Insight IN11590, CFPB Finalizes Two
New Debt Collection Regulations, by Cheryl R. Cooper. , by Cheryl R. Cooper.
68 CFPB, “Debt Collection Practices (Regulation F),” 85 68 CFPB, “Debt Collection Practices (Regulation F),” 85 Federal Register 76734, November 30, 2020. 76734, November 30, 2020.
69 CFPB, “Debt Collection Practices (Regulation F),” 86 69 CFPB, “Debt Collection Practices (Regulation F),” 86 Federal Register 5766, January 19, 2021. 5766, January 19, 2021.
70 T he model disclosure form can be found at https://files.consumerfinance.gov/f/documents/cfpb_model-validation-70 T he model disclosure form can be found at https://files.consumerfinance.gov/f/documents/cfpb_model-validation-
notice_2020-12.pdf. T o learn more about the CFPB’s disclosure testing, see Fors Marsh Group, notice_2020-12.pdf. T o learn more about the CFPB’s disclosure testing, see Fors Marsh Group, Debt Collection
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furnishing information about a debt to a credit bureau before communicating with the consumer furnishing information about a debt to a credit bureau before communicating with the consumer
about the debt by phone or mail.71 In addition, debt collectors are prohibited from suing or about the debt by phone or mail.71 In addition, debt collectors are prohibited from suing or
threatening to sue consumers in the case of time-barred debts.72 threatening to sue consumers in the case of time-barred debts.72
Policy Issues
Research suggests that policymakers face a trade-off in the debt collection market between Research suggests that policymakers face a trade-off in the debt collection market between
consumer protection benefits and the cost of reduced credit availability for consumers. Some consumer protection benefits and the cost of reduced credit availability for consumers. Some
economic research suggests that stricter debt collection regulations may lead to lower recovery economic research suggests that stricter debt collection regulations may lead to lower recovery
rates on past debts, causing a reduction in credit (or higher cost of credit) for some consumersrates on past debts, causing a reduction in credit (or higher cost of credit) for some consumers ——
however, the magnitude of this effect is debated.73 however, the magnitude of this effect is debated.73
Appropriate regulation of the debt collection market has been a focus of congressional attention Appropriate regulation of the debt collection market has been a focus of congressional attention
in the 117th Congress. in the 117th Congress. ~~The House Financial Services Committee marked up and reported~~On May 13, 2021, the House passed H.R. H.R.
2547, the Comprehensive Debt Collection Improvement Act.2547, the Comprehensive Debt Collection Improvement Act.74 This would, among other things, This would, among other things,
limit debt collectors’ email and text messages to consumerslimit debt collectors’ email and text messages to consumers~~; prohibit~~, prohibit consumer reporting agencies from including certain medical debts related to medical debts related to
medical y necessary procedures medical y necessary procedures ~~from inclusion~~ in consumer credit reportsin consumer credit reports;, and make federal and make federal, and
state state~~, and local~~ government debts subject to the FDCPA. It would also provide government debts subject to the FDCPA. It would also provide military servicemembers servicemembers
additional debt collection protections.additional debt collection protections.7475 This section highlights five significant policy issues in the This section highlights five significant policy issues in the
debt collection market: (1) communication frequency; (2) time-barred and obsolete debt; (3) debt collection market: (1) communication frequency; (2) time-barred and obsolete debt; (3)
validation issues; (4) medical debt and credit reporting; and (5) federal, state, and local validation issues; (4) medical debt and credit reporting; and (5) federal, state, and local
government debt. When relevant, each section discusses how H.R. 2547 addresses these policy government debt. When relevant, each section discusses how H.R. 2547 addresses these policy
issues. issues.

Validation Notice Research: Sum m ary of Focus Groups, Cognitive Interviews, and User Experience Testing , February , February
2016, at https://files.consumerfinance.gov/f/documents/cfpb_debt -collection_fmg-summary-report.pdf (hereinafter Fors 2016, at https://files.consumerfinance.gov/f/documents/cfpb_debt -collection_fmg-summary-report.pdf (hereinafter Fors
Marsh Group, Marsh Group, Debt Collection Validation Notice Research: Sum m ary, 2016); and ICF, , 2016); and ICF, Quantitative Survey Testing of
Model Disclosure Clauses and Form s for Debt Collection: Methodology Report, January 21, 2020, at , January 21, 2020, at
https://files.consumerfinance.gov/f/documents/cfpb_icf_debt -survey_methodology-report.pdf (hereinafter ICF, https://files.consumerfinance.gov/f/documents/cfpb_icf_debt -survey_methodology-report.pdf (hereinafter ICF,
Methodology Report, 2020). , 2020).
71 For more information on debt collection and credit reporting, see the “Debt Collection and Credit Reporting” text 71 For more information on debt collection and credit reporting, see the “Debt Collection and Credit Reporting” text
box in box in “T he Market Between Creditors and Debt Collectors.”
72 T o learn more about the CFPB’s disclosure testing relating to time-barred debt and revival, see CFPB, 72 T o learn more about the CFPB’s disclosure testing relating to time-barred debt and revival, see CFPB, Disclosure of
Tim e-Barred Debt and Revival: Findings from the CFPB’s Quantitative Disclosure Testing , February 2020, at , February 2020, at
https://files.consumerfinance.gov/f/documents/cfpb_debt -collection-quantitative-disclosure-testing_report.pdf https://files.consumerfinance.gov/f/documents/cfpb_debt -collection-quantitative-disclosure-testing_report.pdf
(hereinafter CFPB, (hereinafter CFPB, Disclosure of Tim e-Barred Debt and Revival: Findings, 2020); and ICF, , 2020); and ICF, Methodology Report, ,
2020. 2020.
73 Ryan Sandler and Charles J. Romeo, 73 Ryan Sandler and Charles J. Romeo, The Effect of Debt Collection Laws on Access to Credit, CFPB, Office of , CFPB, Office of
Research, Working Paper no. 2018-01, February 12, 2018, at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=Research, Working Paper no. 2018-01, February 12, 2018, at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=
3124954; Viktar Fedaseyeu, 3124954; Viktar Fedaseyeu, Debt Collection Agencies and the Supply of Consum er Credit, Federal Reserve Bank of , Federal Reserve Bank of
Philadelphia, Working Paper no. 20-06, February 2020, at https://www.philadelphiafed.org/consumer-finance/Philadelphia, Working Paper no. 20-06, February 2020, at https://www.philadelphiafed.org/consumer-finance/
consumer-credit/debt-collection-agencies-and-the-supply-of-consumer-credit; and Julia Fonseca, Katherine Strair, and consumer-credit/debt-collection-agencies-and-the-supply-of-consumer-credit; and Julia Fonseca, Katherine Strair, and
Basit Zafar, Basit Zafar, Access to Credit and Financial Health: Evaluating the Im pact of Debt Collection , Federal Reserve Bank of , Federal Reserve Bank of
New York, Staff Report no. 814, May 2017 , at https://www.newyorkfed.org/medialibrary/media/research/staff_reports/New York, Staff Report no. 814, May 2017 , at https://www.newyorkfed.org/medialibrary/media/research/staff_reports/
sr814.pdf?la=en. sr814.pdf?la=en.
74 74 For more information on H.R. 2547, see CRS Insight IN11678, House Passes the Comprehensive Debt Collection Im provem ent Act (H.R. 2547), by Cheryl R. Cooper. 75 H.R. 2547 would prohibit a debt collector from threatening the member’s rank or security clearance or having the H.R. 2547 would prohibit a debt collector from threatening the member’s rank or security clearance or having the
member prosecuted under the Uniform Code of Military Justice, among member prosecuted under the Uniform Code of Military Justice, among ~~other~~ot her things. things.
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The COVID-19 Pandemic and Debt Collection
The economic impact of the COVID-19 pandemic caused many Americans to lose income and face financial The economic impact of the COVID-19 pandemic caused many Americans to lose income and face financial
hardship. While federal laws to respond to the COVID-19 pandemic provided some relief options for consumers hardship. While federal laws to respond to the COVID-19 pandemic provided some relief options for consumers
having trouble paying their loans, the debt col ection industry was general y not directly impacted by these laws.having trouble paying their loans, the debt col ection industry was general y not directly impacted by these laws.7576
Controversial y, during the pandemic, some debt col ectors have continued to col ectControversial y, during the pandemic, some debt col ectors have continued to col ect on consumer debts and sue on consumer debts and sue
consumers in court.consumers in court.7677 Some states have instituted new measures that impacted the debt col ection industry, such Some states have instituted new measures that impacted the debt col ection industry, such
as prohibitions on wage garnishments or bank attachments.as prohibitions on wage garnishments or bank attachments.7778
Due to government policy responses to the pandemic—such as loan forbearance options, enhanced Due to government policy responses to the pandemic—such as loan forbearance options, enhanced
unemployment insurance, and relief checks—consumers have general y not become more delinquent on their loan unemployment insurance, and relief checks—consumers have general y not become more delinquent on their loan
obligations as of spring 2021.obligations as of spring 2021.7879 However, as these relief measures expire, some consumers may fal delinquent on However, as these relief measures expire, some consumers may fal delinquent on
their loans, possibly impacting the debt col ection market and the economic recoverytheir loans, possibly impacting the debt col ection market and the economic recovery general y. general y.
Communication Frequency
The communication frequency standards in the CFPB’s rule continue to be a contentious issue. The communication frequency standards in the CFPB’s rule continue to be a contentious issue.
As mentioned in the As mentioned in the “First Rule: Communication” section, the CFPB’s regulation general y limits section, the CFPB’s regulation general y limits
debt collector phone cal s to seven times in a seven-day period and prohibits debt collectors from debt collector phone cal s to seven times in a seven-day period and prohibits debt collectors from
making cal s within a week after speaking by phone to a consumer. In addition, debt making cal s within a week after speaking by phone to a consumer. In addition, debt ~~col ectors~~collectors
could use technologies such as email or text message without limit, unless consumers were to opt could use technologies such as email or text message without limit, unless consumers were to opt
out. The proposal would set standards on contact frequency, which could reduce lawsuits relating out. The proposal would set standards on contact frequency, which could reduce lawsuits relating
to legal uncertainty, benefitting both debt collectors and consumers. to legal uncertainty, benefitting both debt collectors and consumers.7980
Some observers disagree about whether the CFPB’s proposed communication frequency Some observers disagree about whether the CFPB’s proposed communication frequency
standards would be at the right levels. Some industry representatives argue that cal frequency standards would be at the right levels. Some industry representatives argue that cal frequency
limits may make it more difficult to reach and follow up with consumers, increasing the cost and limits may make it more difficult to reach and follow up with consumers, increasing the cost and
length of time to resolve debts.length of time to resolve debts.8081 Some consumer groups argue that cal frequency limits should Some consumer groups argue that cal frequency limits should
be lowered.be lowered.8182 A CFPB survey found that most consumers considered four or more cal s a week to A CFPB survey found that most consumers considered four or more cal s a week to

7576 During the COVID-19 pandemic, some consumer relief options have been available for consumers having trouble During the COVID-19 pandemic, some consumer relief options have been available for consumers having trouble
paying their loans. For example, paying their loans. For example, loan forbearance has become a common form of consumer relief during the COVID- has become a common form of consumer relief during the COVID-
19 pandemic.19 pandemic. Loan forbearance plans are agreements allowing borrowers to reduce or suspend payments for a short Loan forbearance plans are agreements allowing borrowers to reduce or suspend payments for a short
period of time, providing extended time for consumers to become current on their payments and repay the amounts period of time, providing extended time for consumers to become current on their payments and repay the amounts
owed. T hese plans do not forgive unpaid loan payments. For more information on consumer loanowed. T hese plans do not forgive unpaid loan payments. For more information on consumer loan forbearance during forbearance during
the COVID-19 pandemic, including the impact of the CARES Act (P.L. 116-136) and other federal regulatory efforts, the COVID-19 pandemic, including the impact of the CARES Act (P.L. 116-136) and other federal regulatory efforts,
see CRS Report R46356, see CRS Report R46356, COVID-19: Consum er Loan Forbearance and Other Relief Options, coordinated by Cheryl , coordinated by Cheryl
R. Cooper. For resources for consumers having trouble paying their debts during the COVID-19 pandemic, see Kristin R. Cooper. For resources for consumers having trouble paying their debts during the COVID-19 pandemic, see Kristin
Dohn, Dohn, Dealing with Debt During the Coronavirus Pandem ic: Tips to Help Ease the Im pact, CFPB, June 17, 2020, at , CFPB, June 17, 2020, at
https://www.consumerfinance.gov/about-us/blog/coronavirus-and-dealing-debt-tips-help-ease-impact/. https://www.consumerfinance.gov/about-us/blog/coronavirus-and-dealing-debt-tips-help-ease-impact/.
7677 Paul Kiel and Jeff Ernsthausen, “Debt Collectors Have Made a Fortune T his Year. Now T hey’re Coming for More,” Paul Kiel and Jeff Ernsthausen, “Debt Collectors Have Made a Fortune T his Year. Now T hey’re Coming for More,”
ProPublica, October 5, 2020, at https://www.propublica.org/article/debt-collectors-have-made-a-fortune-this-year-, October 5, 2020, at https://www.propublica.org/article/debt-collectors-have-made-a-fortune-this-year-
now-theyre-coming-for-more; and Shane Shifflett and Justin Scheck, “ Most Big Debt Collectors Backed Off During now-theyre-coming-for-more; and Shane Shifflett and Justin Scheck, “ Most Big Debt Collectors Backed Off During
the Pandemic. One Pressed Ahead,” the Pandemic. One Pressed Ahead,” Wall Street Journal, April 7, 2020, at https://www.wsj.com/articles/most-big-debt-, April 7, 2020, at https://www.wsj.com/articles/most-big-debt-
collectors-backed-off-during-the-pandemic-one-pressed-ahead-11617804180. collectors-backed-off-during-the-pandemic-one-pressed-ahead-11617804180.
7778 CFPB, CFPB, Fair Debt Collection Practices Act, pp. 16-17. , pp. 16-17.
7879 See CRS Report R46578, See CRS Report R46578, COVID-19: Household Debt During the Pandemic, coordinated by Cheryl R. Cooper. , coordinated by Cheryl R. Cooper.
7980 CFPB, “Debt Collection Practices (Regulation F),” 84 CFPB, “Debt Collection Practices (Regulation F),” 84 Federal Register 23370-23371, May 21, 2019. 23370-23371, May 21, 2019.
8081 Letter from ACA International, the Association of Credit & Collection Letter from ACA International, the Association of Credit & Collection ~~Professionals~~Prof essionals, to CFPB Comment Intake—, to CFPB Comment Intake—
Debt Collection, September 17, 2019, pp. 73 -79, at https://www.acainternational.org/assets/advocacy-resources/aca-Debt Collection, September 17, 2019, pp. 73 -79, at https://www.acainternational.org/assets/advocacy-resources/aca-
comment -cfpb-reg-f-9.17.19.pdf. comment -cfpb-reg-f-9.17.19.pdf.
8182 National Consumer Law Center (NCLC), National Consumer Law Center (NCLC), CFPB Debt Collection Rule Must Protect Consumers, Not Abusive
Collectors, May 2019, at https://www.nclc.org/images/pdf/debt_collection/cfpb-debt-collection-rule-summary-, May 2019, at https://www.nclc.org/images/pdf/debt_collection/cfpb-debt-collection-rule-summary-
2019.pdf (hereinafter NCLC, 2019.pdf (hereinafter NCLC, CFPB Debt Collection Rule Must Protect Consum ers, 2019). , 2019).
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be too much contact, and some take this as evidence that the phone cal limit should be lower. be too much contact, and some take this as evidence that the phone cal limit should be lower.8283 In In
addition, although some commentators believe that al owing debt collectors to send unlimited addition, although some commentators believe that al owing debt collectors to send unlimited
emails and text messages could lead to consumer abuse, others argue that these new technologies emails and text messages could lead to consumer abuse, others argue that these new technologies
could be convenient for consumers and reduce debt collection costs. The CFPB’s survey could be convenient for consumers and reduce debt collection costs. The CFPB’s survey
suggested that most consumers preferred email over other types of communication methods.suggested that most consumers preferred email over other types of communication methods.8384
Some argue that because texts or emails may cost money for consumers to receive, these should Some argue that because texts or emails may cost money for consumers to receive, these should
be opt-in communications. be opt-in communications.8485 H.R. 2547 would prohibit a debt collector from contacting a H.R. 2547 would prohibit a debt collector from contacting a
consumer by email or text message without a consumer’s opt-in consent for those communication consumer by email or text message without a consumer’s opt-in consent for those communication
methods, in contrast with the CFPB’s proposal. methods, in contrast with the CFPB’s proposal.
Time-Barred and Obsolete Debt
The proposed treatment of time-barred and obsolete debt in the CFPB’s rule is a contentious The proposed treatment of time-barred and obsolete debt in the CFPB’s rule is a contentious
issue. Consumers are not always aware of statute of limitation rules and might not know that a issue. Consumers are not always aware of statute of limitation rules and might not know that a
debt is no longer legal y owed. This ignorance can cause consumer harm in a few different ways. debt is no longer legal y owed. This ignorance can cause consumer harm in a few different ways.
First, consumers may pay debts that they would choose not to pay or not prioritize paying if they First, consumers may pay debts that they would choose not to pay or not prioritize paying if they
knew they could no longer be sued on the debt. In addition, as mentioned in the knew they could no longer be sued on the debt. In addition, as mentioned in the “Consumer
Experiences” section, time-barred debts can sometimes be revived if a borrower makes a payment section, time-barred debts can sometimes be revived if a borrower makes a payment
or acknowledges the debt in writing. In these cases, consumers can again be sued for this debt, or acknowledges the debt in writing. In these cases, consumers can again be sued for this debt,
and the statute of limitations is restarted. A debt is considered obsolete when it can no longer be and the statute of limitations is restarted. A debt is considered obsolete when it can no longer be
included in a consumer’s credit report, general y after seven years. Consumers may not be aware included in a consumer’s credit report, general y after seven years. Consumers may not be aware
of when debts can no longer be included on credit reports. of when debts can no longer be included on credit reports.
The CFPB considered mandating a time-barred debt disclosure and found in its research that The CFPB considered mandating a time-barred debt disclosure and found in its research that
disclosures can reduce the potential for deception for many consumers. However, the CFPB disclosures can reduce the potential for deception for many consumers. However, the CFPB
decided not to finalize a time-barred debt disclosure due to concerns about (1) debt collector decided not to finalize a time-barred debt disclosure due to concerns about (1) debt collector
compliance costs incurred to determine whether a debt is time-barred and (2) whether the compliance costs incurred to determine whether a debt is time-barred and (2) whether the
proposed disclosure would effectively communicate a debt’s legal status to consumers.proposed disclosure would effectively communicate a debt’s legal status to consumers.8586 The The
time-barred and revival disclosures developed by the CFPB led to more consumer comprehension time-barred and revival disclosures developed by the CFPB led to more consumer comprehension
of these concepts. of these concepts.8687 However, the CFPB’s qualitative testing suggested some consumers were However, the CFPB’s qualitative testing suggested some consumers were
confused about time-barred debt, obsolete debt, and revival, even with disclosures provided.confused about time-barred debt, obsolete debt, and revival, even with disclosures provided.8788 In In
addition, the CFPB found that although a majority of respondents answered comprehension addition, the CFPB found that although a majority of respondents answered comprehension
questions correctly when viewing these disclosures, the comprehension gains were more questions correctly when viewing these disclosures, the comprehension gains were more
pronounced for those with higher education and income levels.pronounced for those with higher education and income levels.8889 For these reasons, some argue For these reasons, some argue
that the that the ~~CFPB should ban the collection of time-barred debts.89~~
~~Validation Issues~~
~~Debt validation is another significant policy issue in this market, where debt collectors may~~
~~contact the wrong consumer or collect for the wrong amount. If a consumer receives a debt~~collection of time-barred debts should be banned.90 H.R. 2547 would prohibit debt collectors from collecting or attempting to collect time-barred debts.

8283 CFPB, CFPB, Consumer Experiences with Debt Collection, p. 31. , p. 31.
8384 CFPB, CFPB, Consumer Experiences with Debt Collection, p. 37. , p. 37.
8485 NCLC, NCLC, CFPB Debt Collection Rule Must Protect Consumers, 2019. , 2019.
8586 CFPB, “Debt Collection Practices (Regulation F),” 86 CFPB, “Debt Collection Practices (Regulation F),” 86 Federal Register 5783, January 19, 2021. 5783, January 19, 2021.
8687 CFPB, CFPB, Disclosure of Time-Barred Debt and Revival: Findings, 2020, p. 25. , 2020, p. 25.
8788 Fors Marsh Group, Fors Marsh Group, Debt Collection Validation Notice Research: Summary,, 2016, pp. 35-39. 2016, pp. 35-39.
8889 CFPB, CFPB, Disclosure of Time-Barred Debt and Revival: Findings, 2020, pp. 25-27. , 2020, pp. 25-27.
8990 NCLC, NCLC, CFPB Debt Collection Rule Must Protect Consumers,, 2019. 2019.
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Validation Issues Debt validation is another significant policy issue in this market, where debt collectors may contact the wrong consumer or collect for the wrong amount. If a consumer receives a debt collection validation notice from a debt collector, no debt collector database or other resource collection validation notice from a debt collector, no debt collector database or other resource
currently exists to help the consumer verify that the debt collector owns the debt or that the currently exists to help the consumer verify that the debt collector owns the debt or that the
information about the debt is accurate. The consumer would need to recognize the debt in order to information about the debt is accurate. The consumer would need to recognize the debt in order to
believe that they owe it. believe that they owe it.
Some of these verification issues may exist because debt collectors are not required to obtain a Some of these verification issues may exist because debt collectors are not required to obtain a
debt’s full files from the original lender.debt’s full files from the original lender.9091 Sometimes, the original lender conveys only basic Sometimes, the original lender conveys only basic
information to the debt collector—unless a consumer disputes the debt—due to expense and information to the debt collector—unless a consumer disputes the debt—due to expense and
technical complications between systems.technical complications between systems.9192 For example, creditors sometimes do not provide For example, creditors sometimes do not provide
copies of underlying account documentation to debt collectors, such as account statements or copies of underlying account documentation to debt collectors, such as account statements or
agreements.agreements.9293 In these cases, debt collectors would obtain these documents from creditors only In these cases, debt collectors would obtain these documents from creditors only
when needed (e.g., if a consumer files an FDCPA dispute).when needed (e.g., if a consumer files an FDCPA dispute).9394 This practice reduces costs for debt This practice reduces costs for debt
collectors, but it may lead to debt transfer information issues between creditors and debt collectors, but it may lead to debt transfer information issues between creditors and debt
collectors. collectors.
According to the CFPB, “there are often substantial deficiencies in the quality and quantity of According to the CFPB, “there are often substantial deficiencies in the quality and quantity of
information collectors receive at placement or sale of the debt that frequently result in collectors information collectors receive at placement or sale of the debt that frequently result in collectors
contacting the wrong consumer, for the wrong amount, or for debts that the contacting the wrong consumer, for the wrong amount, or for debts that the ~~c ollector~~collector is not is not
entitled to collect.”entitled to collect.”9495 CFPB research suggests that many debt collectors might undergo little CFPB research suggests that many debt collectors might undergo little
review of creditor data to check for potential inaccuracies or unreliability.review of creditor data to check for potential inaccuracies or unreliability.9596 In addition, lenders In addition, lenders
often do not make representations as to the accuracy of the transferred information that the debt often do not make representations as to the accuracy of the transferred information that the debt
collector receives.collector receives.9697 Moreover, debt collectors may not receive much information about whether a Moreover, debt collectors may not receive much information about whether a
consumer has disputed the same debt in the past, and as a debt gets older and possibly resold, consumer has disputed the same debt in the past, and as a debt gets older and possibly resold,
information may decay. Some debt collectors also may file litigation against a consumer without information may decay. Some debt collectors also may file litigation against a consumer without
the underlying the underlying ~~documentation97~~documentation98 as creditors often obtain default judgments because many as creditors often obtain default judgments because many
consumers do not attend their court hearings. consumers do not attend their court hearings.9899
Inaccurate information about debts can harm consumers. For example, a consumer might pay Inaccurate information about debts can harm consumers. For example, a consumer might pay
debts they are not obligated to pay. In addition, validation issues can lead to more disputes and debts they are not obligated to pay. In addition, validation issues can lead to more disputes and
~~complaints, requiring consumers and debt collectors to spend time disputing debts or invalid~~
~~lawsuits.~~
~~Part of the reason that many consumers report inaccuracies with their debts in collections may be~~
~~due to limited information on debt validation notices. Currently, most validation notices do not~~
~~include some elements, such as the original creditor or original amount owed. The information in~~

90 91 CFPB, CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking: Outline of Proposals Under
Consideration and Alternatives Considered, July 27, 2016, pp. 6-7, at https://files.consumerfinance.gov/f/documents/, July 27, 2016, pp. 6-7, at https://files.consumerfinance.gov/f/documents/
20160727_cfpb_Outline_of_proposals.pdf (hereinafter CFPB, 20160727_cfpb_Outline_of_proposals.pdf (hereinafter CFPB, Sm all Business Review Panel for Debt Collector and
Debt Buyer Rulem aking). ).
9192 CFPB, CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking , pp. 6-7. , pp. 6-7.
9293 CFPB, CFPB, Study of Third-Party Debt Collection Operations, pp. 22-23. , pp. 22-23.
9394 CFPB, CFPB, Study of Third-Party Debt Collection Operations, pp. 23-24. , pp. 23-24.
9495 CFPB, CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking, p. 6. , p. 6.
9596 CFPB, CFPB, Study of Third-Party Debt Collection Operations, p. 22. , p. 22.
9697 CFPB, CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking , p. 8. , p. 8.
9798 For this reason, the CFPB also was considering a requirement that debt collectors have “reasonable support” legally For this reason, the CFPB also was considering a requirement that debt collectors have “reasonable support” legally
(e.g., necessary documentation) before filing litigation against consumers. T his requirement was not included in the (e.g., necessary documentation) before filing litigation against consumers. T his requirement was not included in the
CFPB’s final rule. See CFPB, CFPB’s final rule. See CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking ,, p. 12. p. 12.
9899 For this reason, the CFPB considered creating a requirement that debt collectors disclose to consumers that a court For this reason, the CFPB considered creating a requirement that debt collectors disclose to consumers that a court
could rule against them if consumers do not defend themselves in court. T his requirement was not included in the could rule against them if consumers do not defend themselves in court. T his requirement was not included in the
CFPB’s final rule. See CFPB, CFPB’s final rule. See CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking , pp. 18-19. , pp. 18-19.
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complaints, requiring consumers and debt collectors to spend time disputing debts or invalid lawsuits. Part of the reason that many consumers report inaccuracies with their debts in collections may be due to limited information on debt validation notices. Currently, most validation notices do not include some elements, such as the original creditor or original amount owed. The information in the notice might be insufficient for some consumers to recognize their debts.the notice might be insufficient for some consumers to recognize their debts.99100 To address some of To address some of
these concerns, the CFPB’s final rule clarifies additional information debt collectors should these concerns, the CFPB’s final rule clarifies additional information debt collectors should
disclose to consumers in the validation notice. However, some argue that validation errors will disclose to consumers in the validation notice. However, some argue that validation errors will
not be reduced without mandating that debt collectors improve the quality and transparency of not be reduced without mandating that debt collectors improve the quality and transparency of
their information and recordkeeping prior to taking action to collect the debt. Others argue that their information and recordkeeping prior to taking action to collect the debt. Others argue that
this type of regulation could be prohibitively expensive and overly burdensome for debt this type of regulation could be prohibitively expensive and overly burdensome for debt
collectors. collectors.~~100~~101
The CFPB has announced enforcement actions regarding inaccurate or unverifiable information The CFPB has announced enforcement actions regarding inaccurate or unverifiable information
used during the debt collection process.used during the debt collection process.~~101~~102 Although the CFPB has considered debt information Although the CFPB has considered debt information
validation proposals, the CFPB did not include any requirements relating to debt information validation proposals, the CFPB did not include any requirements relating to debt information
transfer or validation in its final rule. transfer or validation in its final rule.~~102~~103
Medical Debt and Credit Reporting
Medical debt collection raises specific policy issues relating to inconsistent bil ing and reporting Medical debt collection raises specific policy issues relating to inconsistent bil ing and reporting
practices. According to a 2014 CFPB study, consumers are unlikely to know how much various practices. According to a 2014 CFPB study, consumers are unlikely to know how much various
medical services cost in advance, particularly those associated with accidents and emergencies.medical services cost in advance, particularly those associated with accidents and emergencies.~~103~~
104 People often have difficulty understanding co-pays and health insurance deductibles, and medical People often have difficulty understanding co-pays and health insurance deductibles, and medical
debts are often transferred to debt collectors after different periods of time, depending on the debts are often transferred to debt collectors after different periods of time, depending on the
medical provider. Therefore, medical debts can appear on people’s credit reports inconsistently. medical provider. Therefore, medical debts can appear on people’s credit reports inconsistently.
To address inconsistency concerns, the Internal Revenue Service (IRS) announced on December To address inconsistency concerns, the Internal Revenue Service (IRS) announced on December
31, 2014, a final rule requiring the separation of bil ing and collection policies of nonprofit 31, 2014, a final rule requiring the separation of bil ing and collection policies of nonprofit
hospitals.hospitals.~~104~~105 Under the rule, hospitals that have or are pursuing tax-exempt status are required to Under the rule, hospitals that have or are pursuing tax-exempt status are required to
make reasonable efforts to determine whether their patients are eligible for financial assistance make reasonable efforts to determine whether their patients are eligible for financial assistance
before engaging in “extraordinary collection actions,” which may include turning a debt over to a before engaging in “extraordinary collection actions,” which may include turning a debt over to a
~~collection agency or garnishing wages. In short, tax-exempt hospitals must al ow patients 120~~
~~days from the date of the first bil ing statement to pay the obligation before initiating collection~~
~~procedures.105 The IRS rule impacts only nonprofit hospitals, but on September 15, 2017, the~~

99 100 CFPB, CFPB, Small Business Review Panel for Debt Collector and Debt Buyer ~~Rulemaking~~Rulemakin g, pp. 6-7. , pp. 6-7.
~~100~~101 For example, during the small business review panel process, the public discussion outline discussed how the option For example, during the small business review panel process, the public discussion outline discussed how the option
of transferring all account -level documentation during the debt transfer process would be an overly burdensome of transferring all account -level documentation during the debt transfer process would be an overly burdensome
requirement. See CFPB, requirement. See CFPB, Sm all Business Review Panel for Debt Collector and Debt Buyer Rulem aking , p. 9. , p. 9.
~~101~~102 For example, CFPB, For example, CFPB, Consent Order: Portfolio Recovery Associates, LLC, File no. 2015-CFPB-0023, September 9, , File no. 2015-CFPB-0023, September 9,
2015, at https://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf; and 2015, at https://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf; and
CFPB, CFPB, Consent Order: Encore Capital Group, Inc., Midland Funding, LLC, Midland ~~Credit~~Cre dit Managem ent, Inc. and
Asset Acceptance Capital Corp., File no. 2015-CFPB-0022, September 9, 2019, at https://files.consumerfinance.gov/f/, File no. 2015-CFPB-0022, September 9, 2019, at https://files.consumerfinance.gov/f/
201509_cfpb_consent-order-encore-capital-group.pdf. 201509_cfpb_consent-order-encore-capital-group.pdf.
~~102~~103 For example, during the small business review panel process, the public discussion outline included proposals For example, during the small business review panel process, the public discussion outline included proposals
around the integrity of information, including the transfer of debts and recordkeeping; the around the integrity of information, including the transfer of debts and recordkeeping; the ~~ac quisition~~ acquisition and transfer of and transfer of
accounts; and the process for obtaining information and reviews of information at various stages of the debt collection accounts; and the process for obtaining information and reviews of information at various stages of the debt collection
process. See CFPB, process. See CFPB, Sm all Business Review Panel for Debt Collector and Debt Buyer Rulem aking , pp. 4-8. , pp. 4-8.
~~103~~104 See CFPB, See CFPB, Consumer Credit Reports: A Study of Medical and Non-Medical Collections, December 2014, at , December 2014, at
http://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit -medical-and-non-medical-collections.pdf. http://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit -medical-and-non-medical-collections.pdf.
~~104~~105 Department of the Treasury, Internal Revenue Service (IRS), Department of the Treasury, Internal Revenue Service (IRS), New Requirements for 501(c)(3) Hospitals Under the
Affordable Care Act, at https://www.irs.gov/charities-non-profits/charitable-organizations/requirements-for-501c3-, at https://www.irs.gov/charities-non-profits/charitable-organizations/requirements-for-501c3-
~~hospit als~~hospitals-under-the-affordable-care-act-section-501r (hereinafter IRS, -under-the-affordable-care-act-section-501r (hereinafter IRS, New Requirem ents for 501(c)(3) Hospitals
Under the Affordable Care Act). ).
~~105 See IRS, New Requirements for 501(c)(3) Hospitals Under the Affordable Care Act.~~
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collection agency or garnishing wages. In short, tax-exempt hospitals must al ow patients 120 days from the date of the first bil ing statement to pay the obligation before initiating collection procedures.106 The IRS rule impacts only nonprofit hospitals, but on September 15, 2017, the three major credit reporting agencies—Experian, Equifax, and three major credit reporting agencies—Experian, Equifax, and ~~TransUnion106~~TransUnion107—established a 180-—established a 180-
day (six-month) waiting period after the date of first delinquency before posting a medical day (six-month) waiting period after the date of first delinquency before posting a medical
collection of any type on a consumer credit report. collection of any type on a consumer credit report.~~107~~108
Concerns about the impact of medical debts on credit reports continue. Some observers may Concerns about the impact of medical debts on credit reports continue. Some observers may
believe it is unfair for medical debts to appear on credit reports because these debts are general y believe it is unfair for medical debts to appear on credit reports because these debts are general y
incurred for medical y necessary reasons and are less likely to indicate whether someone is incurred for medical y necessary reasons and are less likely to indicate whether someone is
financial y responsible. For example, the CFPB found that medical debts may be less reliable financial y responsible. For example, the CFPB found that medical debts may be less reliable
predictors of creditworthiness or credit performance than other types of debts.predictors of creditworthiness or credit performance than other types of debts.~~108~~109 H.R. 2547 H.R. 2547
~~would prohibit furnishing medical debt to consumer reporting agencies for a year and would~~
~~prohibit medical debt~~would prohibit consumer reporting agencies from including medical debts related to medical y necessary procedures related to medical y necessary procedures ~~from inclusion in consumer~~
~~credit reports~~in consumer credit reports and also from including other medical debts that are less than a year old or paid. .
Federal, State, and Local Government Debt Exemptions
Currently, government fines and fees are often exempt from the FDCPA.Currently, government fines and fees are often exempt from the FDCPA.~~109~~110 Therefore, if a Therefore, if a
government fine or fee, such as a municipal utility bil , traffic ticket, or court debt, creates a debt government fine or fee, such as a municipal utility bil , traffic ticket, or court debt, creates a debt
that is transferred to a debt collector, that collector is not always required to comply with the that is transferred to a debt collector, that collector is not always required to comply with the
FDCPA. Recently, as more government debts have been outsourced to debt collectors, reports of FDCPA. Recently, as more government debts have been outsourced to debt collectors, reports of
aggressive debt collection practices for these types of debt have grown.aggressive debt collection practices for these types of debt have grown.~~110~~111 Some federal Some federal
government programs, such as the federal student loan program, by statute have flexible government programs, such as the federal student loan program, by statute have flexible
repayment terms (e.g., income-driven repayment plans);repayment terms (e.g., income-driven repayment plans);~~111~~112 however, when these types of debts go however, when these types of debts go
into default and are transferred to a debt collector, the consumer loses some of these consumer into default and are transferred to a debt collector, the consumer loses some of these consumer
protections. H.R. 2547 would make federalprotections. H.R. 2547 would make federal~~, state, and local~~ and state government debts government debts, —including court debts—that are sold to third-party debt collectors subject to the FDCPA and other rules. It would also limit when the federal government can sel or transfer consumer debts to debt collectors and limit fees charged by debt collectors on federal government debts. 106 See IRS, New Requirements for 501(c)(3) Hospitals Under the Affordable Care Act. 107 See Experian, “Medical Debt and Your Credit Score: Here’s What You Need to ~~including court~~
~~debts, debts subject to FDCPA and other rules.~~
~~Conclusion~~
~~The debt collection market continues to be an important part of ensuring that consumers have~~
~~access to a robust consumer credit market; however, the potential for consumer harm may make~~
~~consumer protection laws and regulations particularly important. The regulation of the debt~~
~~collection market may continue to be an active policy issue because it impacts many consumers~~
~~going through the debt collection process and the efficiency of consumer credit markets in the~~
~~United States. As the CFPB implements its debt collection rules, stakeholders may be able to see~~

~~106 See Experian, “Medical Debt and Your Credit Score: Here’s What You Need to~~ Know,” press release, August 8, Know,” press release, August 8,
2017, at https://www.experian.com/blogs/ask-experian/medical-debt-and-your-credit -score/. 2017, at https://www.experian.com/blogs/ask-experian/medical-debt-and-your-credit -score/.
~~107~~108 P.L. 115-174, §302 amends the Fair Credit Reporting Act to provide veterans with credit reporting protections P.L. 115-174, §302 amends the Fair Credit Reporting Act to provide veterans with credit reporting protections
relating to medical debt, extend the waiting period for medical debts to be included in credit reports to one year, and relating to medical debt, extend the waiting period for medical debts to be included in credit reports to one year, and
remove paid or settled medical debts from veterans’ credit reports. remove paid or settled medical debts from veterans’ credit reports.
~~108~~109 See Kenneth P. Brevoort and Michelle Kambara, See Kenneth P. Brevoort and Michelle Kambara, Data Point: Medical Debt and Credit Scores, CFPB, May 2014, at , CFPB, May 2014, at
http://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit -scores.pdf. http://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit -scores.pdf.
~~109~~110 T he FDCPA defines a T he FDCPA defines a debt as money consumers must pay “ arising out of a transaction in which the money, as money consumers must pay “ arising out of a transaction in which the money,
property, insurance, or services which are the subject of the transaction are primarily for personalproperty, insurance, or services which are the subject of the transaction are primarily for personal , family, or household , family, or household
purposes.” See 15 U.S.C. §1692a(5). purposes.” See 15 U.S.C. §1692a(5).
~~110~~111 For example, Blake Ellis and Melanie Hicken, “T he Secret World of Government Debt Collection,” For example, Blake Ellis and Melanie Hicken, “T he Secret World of Government Debt Collection,” CNN Money, ,
February 17, 2015; and Blake Ellis and Melanie Hicken, “February 17, 2015; and Blake Ellis and Melanie Hicken, “ T hreatening Letters from a Government Debt Collector,” T hreatening Letters from a Government Debt Collector,”
CNN Money, February 17, 2015. , February 17, 2015.
~~111~~112 For more information on the federal student loan program and income-driven repayment plans, see CRS Report For more information on the federal student loan program and income-driven repayment plans, see CRS Report
R45931, R45931, Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program : Term s and
Conditions for Borrowers, by David P. Smole. , by David P. Smole.
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Conclusion The debt collection market continues to be an important part of ensuring that consumers have access to a robust consumer credit market; however, the potential for consumer harm may make consumer protection laws and regulations particularly important. The regulation of the debt collection market may continue to be an active policy issue because it impacts many consumers going through the debt collection process and the efficiency of consumer credit markets in the United States. As the CFPB implements its debt collection rules, stakeholders may be able to see how new regulations could impact the market. For these reasons, the debt collection market may how new regulations could impact the market. For these reasons, the debt collection market may
continue to be the subject of congressional interest and legislative proposals. continue to be the subject of congressional interest and legislative proposals.

Author Information

Cheryl R. Cooper Cheryl R. Cooper

Analyst in Financial Economics Analyst in Financial Economics

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