Waters Stands Up Against Abusive Debt Collection Practices

As Prepared for Delivery

Today, the Committee will examine legislation to curb predatory and abusive debt collection practices.

Last year alone, the Consumer Financial Protection Bureau received over 81,000 consumer complaints about debt collection practices. Since the creation of the Consumer Bureau’s consumer complaint database, the agency has received more complaints about debt collection than any other issue. According to a Consumer Bureau survey on debt collection, nearly one in three Americans with a credit record were contacted by at least one creditor or collector trying to collect one or more debts during the previous year. In some instances, consumers are relentlessly pursued by debt collectors regarding debts that they no longer owe, or debts that are not theirs. Some consumers are not informed of their rights under the law.

Communities of color are disproportionately affected by predatory debt collectors. The Consumer Bureau’s survey on debt collection found that people of color reported being contacted by debt collectors more frequently than their white peers. 

Small business owners also face predatory debt collection practices. Unlike consumers, small business owners do not currently have the same protections under the law. For instance, entities pursuing business debts are not covered or bound by the Fair Debt Collection Practices Act. Furthermore, small business owners may also face a predatory clause buried in their debt contracts called “confessions of judgement.”  A confession of judgement in a loan contract often forces the borrower to waive defenses they could lawfully use in court. Predatory debt collectors have used this tactic to force courts to rule against borrowers, regardless of the specifics of the case. This has resulted in garnished wages and seized property, at times without the knowledge and consent of the small business owner.  The New York Times highlighted how this problem has impacted New York City’s taxi medallion drivers, who have needlessly suffered at the hands of predatory debt collectors and contract agreements. 

Given the impact of predatory debt collection practices on Americans across the country, it is particularly important for the Consumer Bureau to stand up for consumers. Unfortunately, the Consumer Bureau’s proposal to address predatory debt collection, which was released in May of this year by Director Kraninger, fails to protect Americans from harassment by debt collectors. Under the Consumer Bureau’s proposal, debt collectors would be allowed to send unlimited emails and text messages to consumers and call them up to seven times a week, per debt to collect debts. The rule fails to address consumer privacy concerns and fails to protect consumers against debt collection attorneys who make misleading statements in court documents. The rule also does not go far enough to create strong guidelines to ensure that consumers receive disclosures or to protect consumers against the collection of time-barred debt. This is an unacceptable failure by our consumer watchdog, which simply must do more for hardworking American consumers.

Today, we will hear from a group of expert witnesses and discuss several legislative proposals that have been put forth by Members of the Committee in order to better protect consumers and small business owners from predatory debt collection practices.

I look forward to the testimony of our witnesses and to advancing solutions to address this pressing issue.

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