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Emails, texts from debt collectors? More repayment reminders could be coming under a new rule

One-third of Americans with a credit report have debt in collections – and they could soon be on the receiving end of texts and emails from collectors eager to track down those overdue payments.

The Consumer Financial Protection Bureau (CFPB), an agency created after the 2008 financial crisis to protect consumers, has issued a final rule that updates a 43-year-old law that oversees debt collections. ACA International, the trade association for the debt collection industry, says it’s long overdue given that consumers now prefer to communicate via text and email.

But some consumer advocates warn that the rule could result in consumers getting spammed by texts, emails and phone calls from debt collectors at a time when more Americans are under financial stress due to the coronavirus pandemic. The 653-page rule, which has been in development for seven years, limits debt collectors from calling consumers more than 7 times a week for one debt – but advocates say that consumers with multiple overdue debts could end up facing a barrage of phone calls.

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The rule also has no limit on the number of texts or emails that debt collectors can send to consumers, says Eamonn Moran, of counsel at Morgan Lewis and a former CFPB counsel.

That could be problematic – and not only for making consumers feel harassed, advocates say. Consumers with expensive texting or data plans could end up facing higher costs if debt collectors deluge them with messages.

“Nobody wants an unwanted communication,” says Linda Jun, senior policy counsel at the nonprofit Americans for Financial Reform. “But lower-income folks, a lot of them are on pay-as-you-text plans, so that's a major concern if a debt collector gets that number. That is costing that person money, especially money they might not have.”

The CFPB said the rule is needed because it clarifies and updates the Fair Debt Collection Practices Act, a law that was passed in 1977 – long before voicemail was commonplace, let alone email or texting. “Vast changes” have occurred since then, CFPB director Kathleen L. Kraninger said in a statement.

A nation in debt?

The median overdue debt on Americans' credit reports stands at $1,639, according to December data from the Urban Institute. It’s an issue that particularly affects communities of color, where more than 4 of 10 people have a debt in collections, the think tank found.

To be sure, financial stress has mounted since then. With the pandemic shuttering the economy in the spring and leading to a recession, almost half of U.S. households reported serious financial problems during the outbreak, according to a September study from NPR, the Robert Wood Johnson Foundation and the Harvard T.H. Chan School of Public Health.

How to limit message from collectors

The rule is a “mixed bag,” for consumers, Jun notes. While they might not be eager to get texts or emails from debt collectors, the rule provides some protections.

“A consumer may restrict the media through which a debt collector communicates by designating a particular medium, such as email, as one that cannot be used for debt collection communications,” Moran says.

The rule also requires that debt collectors include instructions for how to opt-out of additional emails or texts, he adds. It also allows consumers to tell collectors to “stop calling,” according to the National Consumer Law Center.

The rule would go into effect a year after it’s published in the Federal Register, which could occur in a few weeks, according to a blog post from Clark Hill PLC attorneys.

"Just as the deluge of election-related text messages subsides, the Trump administration has opened the floodgates for unlimited texts from debt collectors to take their place,” says Derek Martin, director of advocacy group Allied Progress. “This won't result in better outcomes for consumers, just more hassle in an already stressful world."

This article originally appeared on USA TODAY: Debt collection calls will be joined by texts, emails under CFPB rule