The Debt Collection Market and Selected Policy Issues

The Debt Collection Market and Selected Policy Issues

The Debt Collection Market and Selected
June 22, 2021
Policy Issues
Cheryl R. Cooper
When a consumer defaults on a debt, a third-party debt collector often collects the debt obligation
Analyst in Financial
rather than the lender to whom the debt is originally owed. The debt collection market helps
Economics
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
be more willing to lend to consumers at lower initial loan costs, leading to more access to credit

for consumers.
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.
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
previous year.
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
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.
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%).
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
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
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.
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
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
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
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
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
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.
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. On May 13, 2021, the House passed the
Comprehensive Debt Collection Improvement Act (H.R. 2547; H.Rept. 117-23), which addresses many of these policy
issues. Among other things, the bill would limit debt collectors’ email and text messages to consumers , prohibit consumer
reporting agencies from including certain medical debts related to medically necessary procedures in consumer credit reports ,
and make all federal and state government debts subject to the FDCPA. It would also provide military servicemembers
additional debt collection protections.

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Contents
Introduction ................................................................................................................... 1
Overview of Debt Collection Market.................................................................................. 2
The Market Between Creditors and Debt Collectors ........................................................ 2
Consumer Experiences ............................................................................................... 5
The Fair Debt Collection Practices Act ............................................................................... 7
Supervision and Enforcement ...................................................................................... 8
Consumer Financial Protection Bureau Rulemaking........................................................ 9
First Rule: Communication .................................................................................... 9
Second Rule: Disclosure........................................................................................ 9
Policy Issues ................................................................................................................ 10
Communication Frequency ....................................................................................... 11
Time-Barred and Obsolete Debt ................................................................................. 12
Validation Issues ..................................................................................................... 13
Medical Debt and Credit Reporting ............................................................................ 14
Federal, State, and Local Government Debt Exemptions................................................ 15
Conclusion................................................................................................................... 16

Figures
Figure 1. Debt Collection Major Market Segmentation by 2019 Share of Revenue .................... 3

Tables
Table 1. Types of Debt Collection Complaints Reported by Consumers in 2020 ........................ 6

Contacts
Author Information ....................................................................................................... 16

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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
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
when a consumer defaults, facilitating the resolution of delinquencies and defaults and making
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
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,
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
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 protection laws and regulations are
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
in 2020.4
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
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
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
in the 117th Congress. On May 13, 2021, the House passed the Comprehensive Debt Collection
Improvement Act (H.R. 2547; H.Rept. 117-23), which, among other things, would limit debt
collectors’ email and text messages to consumers, prohibit consumer reporting agencies from
including certain medical debts related to medical y necessary procedures in consumer credit
reports, and make al federal and state government debts subject to the FDCPA. It would also
provide military servicemembers 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
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
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.

1 Gabriel Schulman, Debt Collection Agencies in the US, IBIS World, Industry Report 56144, December 2020, p. 7
(hereinafter Schulman, Debt Collection Agencies in the US, IBIS World, 2020).
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/
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, An Overview of Consumer Finance and
Policy Issues, by Cheryl R. Cooper.
4 CFPB, Consumer Response Annual Report: January 1-December 31, 2020, March 2020, p. 9, at
https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf (hereinafter
CFPB, Consum er Response Annual Report).
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Overview of Debt Collection Market
This section provides an overview of the debt collection market. It describes the market between
creditors and debt collectors and discusses debt collector operations in detail. It also addresses
consumer experiences in the market, including the CFPB’s consumer complaints about the
industry.
The Market Between Creditors and Debt Collectors
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
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
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
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
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
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,
medical, retail, and government debts (see Figure 1).9 In 2020, financial services debts decreased
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
pandemic ends.10

5 Robert M. Hunt, Collecting Consumer Debt in America, Federal Reserve Bank of Philadelphia, Business Review,
February 2007, at https://www.philadelphiafed.org/-/media/research-and-data/publications/business-review/2007/q2/
hunt_collecting-consumer-debt.pdf (hereinafter Hunt, Collecting Consum er Debt in Am erica, Federal Reserve Bank of
Philadelphia, 2007).
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
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,
“Chapter Five: Overview of Debt Collection,” Reengineering NonBank Supervisors, January 2020, p. 5, at
https://www.csbs.org/system/files/2020-02/Chapter%20Five%20-
%20Overview%20of%20Debt%20Collection%20FINAL4.pdf (hereinafter Conference of State Bank Supervisors,
“Chapter Five: Overview of Debt Collection,” 2020).
8 Rohan Jaura, Debt Collection Agencies in the US, IBIS World, Industry Report 56144, December 2019, p.16
(hereinafter Jaura, Debt Collection Agencies in the US, IBIS World, 2019).
9 Jaura, Debt Collection Agencies in the US, IBIS World, 2019, p. 16.
10 Schulman, Debt Collection Agencies in the US, 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, Debt Col ection Agencies in the US, IBIS World, Industry Report 56144, December 2019,
p. 16.
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
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
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
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
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
larger companies and increased regulatory compliance burdens.17
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
particular debt, knowing that some consumers wil never pay back their debts in full. Therefore,

11 CFPB, Fair Debt Collection Practices Act, March 2021, pp. 14-15, at https://files.consumerfinance.gov/f/documents/
cfpb_fdcpa_annual-report -congress_03-2021.pdf (hereinafter CFPB, Fair Debt Collection Practices Act). Some states
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.
12 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, July 2019, p. 10, at
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, Fair Debt Collection Practices Act, pp. 14-15.
14 Jaura, Debt Collection Agencies in the US, IBIS World, 2019, p. 4.
15 CFPB, “Debt Collection Practices (Regulation F),” 84 Federal Register 23392-23393, May 21, 2019.
16 Hunt, Collecting Consumer Debt in America, Federal Reserve Bank of Philadelphia, 2007.
17 Jaura, Debt Collection Agencies in the US, IBIS World, 2019, p. 11.
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when a debt collector contacts a consumer, both parties can negotiate the amount and payment
schedule of the debt.18
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
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
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
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—
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
https://www.consumerfinance.gov/ask-cfpb/what -is-the-best-way-to-negotiate-a-settlement-with-a-debt-collector-en-
1447/.
19 Legal processes are in place to seize collateral for secured loans, such as foreclosure or car repossession.
20 CFPB, Study of Third-Party Debt Collection Operations, July 2016, p. 18, at https://files.consumerfinance.gov/f/
documents/20160727_cfpb_Third_Party_Debt_Collection_Operations_Study.pdf (hereinafter CFPB, Study of Third-
Party Debt Collection Operations).
21 CFPB, Study of Third-Party Debt Collection Operations, p. 18.
22 CFPB, Consumer Experiences with Debt Collection, p. 5.
23 CFPB, Consumer Experiences with Debt Collection, p. 5.
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Debt Collection and Credit Reporting
Many financial institutions furnish information 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
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
relationship with those consumers.
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
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
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
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.
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
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 passive col ections—reporting a
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
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
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
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
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
Consumer Experiences
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
contacted in the last year by at least one creditor or collector trying to collect on one or more

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.
25 CFPB, Study of Third-Party Debt Collection Operations, p. 19.
26 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, p. 5.
27 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, 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
Interactive Map,” last updated December 17, 2019, at https://apps.urban.org/features/debt-interactive-map/?type=
overall&variable=pct_debt_collections.
28 CFPB, Consumer Experiences with Debt Collection, p. 5.
29 CFPB, Consumer Experiences with Debt Collection, p. 5.
30 CFPB, Consumer Experiences with Debt Collection, pp. 14-15.
31 CFPB, Market Snapshot: Third-Party Debt Collections Tradeline Reporting, p. 14.
32 CFPB, Consumer Experiences with Debt Collection, p. 24.
33 CFPB, Consumer Experiences with Debt Collection, p. 5.
34 CFPB, Consumer Experiences with Debt Collection, p. 25.
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/.
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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
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
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
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%) (see Table 1).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
49%
Complaints about written notification about the debt
20%
Negative or legal actions or threats to take such actions
10%
False statements or representations
10%
Complaints about communication tactics
8%
Threats to contact someone or share information improperly
2%
Source: Consumer Financial Protection Bureau, Fair Debt Col ection Practices Act, March 2021, p. 19, at
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
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
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
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
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
the financial ability to pay their debts in instal ments over several years, rather than receiving
more immediate relief from their debts.42

36 CFPB, Consumer Experiences with Debt Collection, p. 5.
37 CFPB, Consumer Experiences with Debt Collection, pp. 15-16.
38 CFPB, Consumer Experiences with Debt Collection, p. 5.
39 CFPB, Consumer Response Annual Report, 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, Consum er Sentinel
Network: Data Book 2020, 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.
40 CFPB, Fair Debt Collection Practices Act, p. 19. T he “ T he Fair Debt Collection Practices Act ” section of this report
discusses written notification requirements in detail.
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.
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,
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
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In addition to the federal bankruptcy process, many states limit the length of time consumers can
be sued on a debt, cal ed time-barred debt.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
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 informal bankruptcy. Even though consumers are no
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
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.
Debt Relief Companies and Credit Counseling Agencies
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
are debt consolidation (consolidating debts into one larger consumer loan) and debt management plans (working
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
organizations.
Debt settlements 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
sometimes managed by debt relief companies. Consumer Financial Protection Bureau data suggest a growth in
debt settlements in recent years.47
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
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
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
misrepresentations when telemarketing debt relief services to consumers. Given the industry’s growth in recent
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
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
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.
44 FT C, The Structure and Practices of the Debt Buying Industry, January 2013, p. 42, at https://www.ftc.gov/sites/
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
enforceable actions. See 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.
47 Christa Gibbs et al., Recent Trends in Debt Settlement and Credit Counseling, CFPB, Quarterly Consumer Credit
T rends, July 2020, at https://files.consumerfinance.gov/f/documents/cfpb_quarterly-consumer-credit-trends_debt -
settlement -credit -counseling_2020-07.pdf.
48 P.L. 109-280, §1220.
49 FT C, “T elemarketing Sales Rule,” 75 Federal Register 48458-48523, August 10, 2010.
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/.
51 For more information about the Fair Debt Collection Practices Act (FDCPA), 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
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
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,
consumer protection laws and regulations may be particularly consequential.
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
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
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
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
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
initial communication.60
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
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
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
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
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
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.
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.
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
practices of debt collectors, see CFPB, Study of Third-Party Debt Collection Operations, pp. 20-21.
55 15 U.S.C. §1692d.
56 15 U.S.C. §1692e.
57 15 U.S.C. §1692c(a)(1).
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).
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,
Introduction to Financial Services: The Consum er Financial Protection Bureau (CFPB) , by Cheryl R. Cooper and
David H. Carpenter.
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enforce FDCPA provisions.62 The FDCPA also establishes a private right of action for consumers
to sue on their own behalf.63
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
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
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
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
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
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
debt collectors must disclose to consumers.69 The following sections describe selected provisions
of the CFPB’s two regulations.
First Rule: Communication
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
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
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
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
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
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

62 15 U.S.C. §1692l(a)-(b).
63 15 U.S.C. §1692k.
64 CFPB, Fair Debt Collection Practices Act, pp. 23-24.
65 CFPB, Fair Debt Collection Practices Act, pp. 29-37.
66 CFPB, Fair Debt Collection Practices Act, pp. 38-45.
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.
68 CFPB, “Debt Collection Practices (Regulation F),” 85 Federal Register 76734, November 30, 2020.
69 CFPB, “Debt Collection Practices (Regulation F),” 86 Federal Register 5766, January 19, 2021.
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, Debt Collection
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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
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
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
rates 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
Appropriate regulation of the debt collection market has been a focus of congressional attention
in the 117th Congress. On May 13, 2021, the House passed H.R. 2547, the Comprehensive Debt
Collection Improvement Act.74 This would, among other things, limit debt collectors’ email and
text messages to consumers, prohibit consumer reporting agencies from including certain medical
debts related to medical y necessary procedures in consumer credit reports, and make federal and
state government debts subject to the FDCPA. It would also provide military servicemembers
additional debt collection protections.75 This section highlights five significant policy issues in the
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
government debt. When relevant, each section discusses how H.R. 2547 addresses these policy
issues.

Validation Notice Research: Sum m ary of Focus Groups, Cognitive Interviews, and User Experience Testing , February
2016, at https://files.consumerfinance.gov/f/documents/cfpb_debt -collection_fmg-summary-report.pdf (hereinafter Fors
Marsh Group, Debt Collection Validation Notice Research: Sum m ary, 2016); and ICF, Quantitative Survey Testing of
Model Disclosure Clauses and Form s for Debt Collection: Methodology Report, January 21, 2020, at
https://files.consumerfinance.gov/f/documents/cfpb_icf_debt -survey_methodology-report.pdf (hereinafter ICF,
Methodology Report, 2020).
71 For more information on debt collection and credit reporting, see the “Debt Collection and Credit Reporting” text
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, Disclosure of
Tim e-Barred Debt and Revival: Findings from the CFPB’s Quantitative Disclosure Testing , February 2020, at
https://files.consumerfinance.gov/f/documents/cfpb_debt -collection-quantitative-disclosure-testing_report.pdf
(hereinafter CFPB, Disclosure of Tim e-Barred Debt and Revival: Findings, 2020); and ICF, Methodology Report,
2020.
73 Ryan Sandler and Charles J. Romeo, The Effect of Debt Collection Laws on Access to Credit, CFPB, Office of
Research, Working Paper no. 2018-01, February 12, 2018, at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=
3124954; Viktar Fedaseyeu, Debt Collection Agencies and the Supply of Consum er Credit, Federal Reserve Bank of
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
Basit Zafar, Access to Credit and Financial Health: Evaluating the Im pact of Debt Collection , Federal Reserve Bank of
New York, Staff Report no. 814, May 2017 , at https://www.newyorkfed.org/medialibrary/media/research/staff_reports/
sr814.pdf?la=en.
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
member prosecuted under the Uniform Code of Military Justice, among ot her 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
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.76
Controversial y, during the pandemic, some debt col ectors have continued to col ect on consumer debts and sue
consumers in court.77 Some states have instituted new measures that impacted the debt col ection industry, such
as prohibitions on wage garnishments or bank attachments.78
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
obligations as of spring 2021.79 However, as these relief measures expire, some consumers may fal delinquent on
their loans, possibly impacting the debt col ection market and the economic recovery general y.
Communication Frequency
The communication frequency standards in the CFPB’s rule continue to be a contentious issue.
As mentioned in the “First Rule: Communication” 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
making cal s within a week after speaking by phone to a consumer. In addition, debt collectors
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
to legal uncertainty, benefitting both debt collectors and consumers.80
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
limits may make it more difficult to reach and follow up with consumers, increasing the cost and
length of time to resolve debts.81 Some consumer groups argue that cal frequency limits should
be lowered.82 A CFPB survey found that most consumers considered four or more cal s a week to

76 During the COVID-19 pandemic, some consumer relief options have been available for consumers having trouble
paying their loans. For example, loan forbearance has become a common form of consumer relief during the COVID-
19 pandemic. 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
owed. T hese plans do not forgive unpaid loan payments. For more information on consumer loan forbearance during
the COVID-19 pandemic, including the impact of the CARES Act (P.L. 116-136) and other federal regulatory efforts,
see CRS Report R46356, COVID-19: Consum er Loan Forbearance and Other Relief Options, coordinated by Cheryl
R. Cooper. For resources for consumers having trouble paying their debts during the COVID-19 pandemic, see Kristin
Dohn, Dealing with Debt During the Coronavirus Pandem ic: Tips to Help Ease the Im pact, CFPB, June 17, 2020, at
https://www.consumerfinance.gov/about-us/blog/coronavirus-and-dealing-debt-tips-help-ease-impact/.
77 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-
now-theyre-coming-for-more; and Shane Shifflett and Justin Scheck, “ Most Big Debt Collectors Backed Off During
the Pandemic. One Pressed Ahead,” Wall Street Journal, April 7, 2020, at https://www.wsj.com/articles/most-big-debt-
collectors-backed-off-during-the-pandemic-one-pressed-ahead-11617804180.
78 CFPB, Fair Debt Collection Practices Act, pp. 16-17.
79 See CRS Report R46578, COVID-19: Household Debt During the Pandemic, coordinated by Cheryl R. Cooper.
80 CFPB, “Debt Collection Practices (Regulation F),” 84 Federal Register 23370-23371, May 21, 2019.
81 Letter from ACA International, the Association of Credit & Collection Prof essionals, to CFPB Comment Intake—
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.
82 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-
2019.pdf (hereinafter NCLC, CFPB Debt Collection Rule Must Protect Consum ers, 2019).
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be too much contact, and some take this as evidence that the phone cal limit should be lower.83 In
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
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.84
Some argue that because texts or emails may cost money for consumers to receive, these should
be opt-in communications.85 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
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
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.
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 “Consumer
Experiences” 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,
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
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
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
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.86 The
time-barred and revival disclosures developed by the CFPB led to more consumer comprehension
of these concepts.87 However, the CFPB’s qualitative testing suggested some consumers were
confused about time-barred debt, obsolete debt, and revival, even with disclosures provided.88 In
addition, the CFPB found that although a majority of respondents answered comprehension
questions correctly when viewing these disclosures, the comprehension gains were more
pronounced for those with higher education and income levels.89 For these reasons, some argue
that the 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.

83 CFPB, Consumer Experiences with Debt Collection, p. 31.
84 CFPB, Consumer Experiences with Debt Collection, p. 37.
85 NCLC, CFPB Debt Collection Rule Must Protect Consumers, 2019.
86 CFPB, “Debt Collection Practices (Regulation F),” 86 Federal Register 5783, January 19, 2021.
87 CFPB, Disclosure of Time-Barred Debt and Revival: Findings, 2020, p. 25.
88 Fors Marsh Group, Debt Collection Validation Notice Research: Summary, 2016, pp. 35-39.
89 CFPB, Disclosure of Time-Barred Debt and Revival: Findings, 2020, pp. 25-27.
90 NCLC, CFPB Debt Collection Rule Must Protect Consumers, 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
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
believe that they owe it.
Some of these verification issues may exist because debt collectors are not required to obtain a
debt’s full files from the original lender.91 Sometimes, the original lender conveys only basic
information to the debt collector—unless a consumer disputes the debt—due to expense and
technical complications between systems.92 For example, creditors sometimes do not provide
copies of underlying account documentation to debt collectors, such as account statements or
agreements.93 In these cases, debt collectors would obtain these documents from creditors only
when needed (e.g., if a consumer files an FDCPA dispute).94 This practice reduces costs for debt
collectors, but it may lead to debt transfer information issues between creditors and debt
collectors.
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
contacting the wrong consumer, for the wrong amount, or for debts that the collector is not
entitled to collect.”95 CFPB research suggests that many debt collectors might undergo little
review of creditor data to check for potential inaccuracies or unreliability.96 In addition, lenders
often do not make representations as to the accuracy of the transferred information that the debt
collector receives.97 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,
information may decay. Some debt collectors also may file litigation against a consumer without
the underlying documentation98 as creditors often obtain default judgments because many
consumers do not attend their court hearings.99
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

91 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/
20160727_cfpb_Outline_of_proposals.pdf (hereinafter CFPB, Sm all Business Review Panel for Debt Collector and
Debt Buyer Rulem aking).
92 CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking, pp. 6-7.
93 CFPB, Study of Third-Party Debt Collection Operations, pp. 22-23.
94 CFPB, Study of Third-Party Debt Collection Operations, pp. 23-24.
95 CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking, p. 6.
96 CFPB, Study of Third-Party Debt Collection Operations, p. 22.
97 CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking , p. 8.
98 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
CFPB’s final rule. See CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking , p. 12.
99 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
CFPB’s final rule. See CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking , 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.100 To address some
of 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
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
this type of regulation could be prohibitively expensive and overly burdensome for debt
collectors.101
The CFPB has announced enforcement actions regarding inaccurate or unverifiable information
used during the debt collection process.102 Although the CFPB has considered debt information
validation proposals, the CFPB did not include any requirements relating to debt information
transfer or validation in its final rule.103
Medical Debt and Credit 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
medical services cost in advance, particularly those associated with accidents and emergencies.104
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
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
31, 2014, a final rule requiring the separation of bil ing and collection policies of nonprofit
hospitals.105 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
before engaging in “extraordinary collection actions,” which may include turning a debt over to a

100 CFPB, Small Business Review Panel for Debt Collector and Debt Buyer Rulemakin g, pp. 6-7.
101 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
requirement. See CFPB, Sm all Business Review Panel for Debt Collector and Debt Buyer Rulem aking , p. 9.
102 For example, CFPB, Consent Order: Portfolio Recovery Associates, LLC, File no. 2015-CFPB-0023, September 9,
2015, at https://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf; and
CFPB, Consent Order: Encore Capital Group, Inc., Midland Funding, LLC, Midland Cre dit Managem ent, Inc. and
Asset Acceptance Capital Corp., File no. 2015-CFPB-0022, September 9, 2019, at https://files.consumerfinance.gov/f/
201509_cfpb_consent-order-encore-capital-group.pdf.
103 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 acquisition and transfer of
accounts; and the process for obtaining information and reviews of information at various stages of the debt collection
process. See CFPB, Sm all Business Review Panel for Debt Collector and Debt Buyer Rulem aking , pp. 4-8.
104 See CFPB, Consumer Credit Reports: A Study of Medical and Non-Medical Collections, December 2014, at
http://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit -medical-and-non-medical-collections.pdf.
105 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-
hospitals-under-the-affordable-care-act-section-501r (hereinafter IRS, New Requirem ents 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 TransUnion107—established a 180-
day (six-month) waiting period after the date of first delinquency before posting a medical
collection of any type on a consumer credit report.108
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
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
predictors of creditworthiness or credit performance than other types of debts.109 H.R. 2547
would prohibit consumer reporting agencies from including medical debts related to medical y
necessary procedures 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.110 Therefore, if a
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
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.111 Some federal
government programs, such as the federal student loan program, by statute have flexible
repayment terms (e.g., income-driven repayment plans);112 however, when these types of debts go
into default and are transferred to a debt collector, the consumer loses some of these consumer
protections. H.R. 2547 would make federal and state 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 Know,” press release, August 8,
2017, at https://www.experian.com/blogs/ask-experian/medical-debt-and-your-credit -score/.
108 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
remove paid or settled medical debts from veterans’ credit reports.
109 See Kenneth P. Brevoort and Michelle Kambara, Data Point: Medical Debt and Credit Scores, CFPB, May 2014, at
http://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit -scores.pdf.
110 T he FDCPA defines a debt 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 personal , family, or household
purposes.” See 15 U.S.C. §1692a(5).
111 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, “T hreatening Letters from a Government Debt Collector,”
CNN Money, February 17, 2015.
112 For more information on the federal student loan program and income-driven repayment plans, see CRS Report
R45931, Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program : Term s and
Conditions for Borrowers, 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
continue to be the subject of congressional interest and legislative proposals.

Author Information

Cheryl R. Cooper

Analyst in Financial Economics

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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