Consumer Harms: Regulator Exposes Illegal Practices by Debt Collectors

Regulator calls out debt collectors, loan servicers for illegal, harmful practices

Loan servicers and debt collectors routinely engage in harmful, deceptive, or illegal practices, according to a new report by a key federal regulator.

The Consumer Financial Protection Bureau (CFPB) released the report as part of its regular review of institutions in the consumer finance marketplace.

The report pointed to specific harms caused by loan servicers and debt collectors.

“Loan servicers and debt collectors harm borrowers when they fail to provide required information, create barriers to customer assistance, or harass people about their debts,” said CFPB Director Rohit Chopra. “The CFPB is working to ensure servicers, debt collectors, and other financial service providers follow the law to protect consumers.”

The CFPB called attention to particular harms, including:

Relative to student loans: Examiners found certain servicers had excessive phone hold times, their call centers were significantly understaffed, they had problems with their interactive voice response systems, and some consumers were prevented from accessing online account management portals. Additionally, servicers provided inaccurate information about the forms borrowers were required to submit to qualify for loan programs with certain benefits such as forbearance. They also failed to follow requirements about notifying consumers of preauthorized electronic funds transfers that were larger than prior transfers under the same authorization.

Relative to debt collectors: Examiners uncovered instances of collectors using aggressive or verbally abusive language, including to consumers unable to pay due to a recent hospitalization. In other cases, debt collectors communicated with consumers at times and places known by the collectors to be inconvenient or unusual; made over 100 calls to consumers despite being asked to stop; and failed to cease contacting consumers by a certain form of communication, such as a text message or specific telephone number, despite being asked to stop by consumers.

The CFPB notes it has authority to penalize entities it finds in violation of the law and that the report is intended to advise financial service providers of acts construed as outside the law.

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