May 7, 2019 / 7:12 PM / a year ago

UPDATE 2-U.S. consumer bureau proposes update to debt-collection rules

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By Katanga Johnson

WASHINGTON, May 7 (Reuters) - The U.S. Consumer Financial Protection Bureau on Tuesday proposed rules to clarify how debt collectors can communicate with consumers, curbing how often they can call borrowers but allowing unlimited contact through text messages and emails.

Under the proposal, third-party debt collectors like Portfolio Recovery Group, Inc. and debt buyers like Encore Capital Group will be limited to seven phone calls a week to borrowers, and must stop calling for a week after successfully contacting a borrower.

However, debt collectors would be allowed unlimited contact with consumers via text messages and emails as long as they provide the ability to opt out of those forms of communication.

The new proposal prohibits the use of social media and work email for debt-collection notices, among other items.

The agency's previous director, Richard Cordray, had indicated in 2016 that it would overhaul the debt-collection market.

Debt collection is among the most complained issues for consumers. The CFPB complaints database received 81,500 consumer grievances last year, according to a bureau report to Congress.

The agency's current director, Kathy Kraninger, said she is "keenly interested in hearing all views" so the agency can develop an appropriate final rule moving forward.

Stefani Jackman, an Atlanta-based CFPB compliance lawyer at Ballard Spahr, said that while Tuesday's proposal addresses one complication by enabling consumers to communicate with collection agencies through preferred channels, inevitably new complications would arise.

Consumer advocates argue that the Republican-led CPFB won't go far enough in reining in abusive debt-collection practices.

The proposal marks the first time a regulator has proposed rules around debt collection practices, after standards were first established in a 1977 law. (Reporting by Katanga Johnson; editing by Paul Simao and Bernadette Baum)

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