By Emily Stephenson
WASHINGTON, Nov 6 (Reuters) - Debt collectors using textmessages and social media to pursue delinquent borrowers couldcome under new scrutiny as the U.S. consumer financial watchdogwarns of new rules as part of a crackdown on the collectionindustry.
The Consumer Financial Protection Bureau said on Wednesdaythat before it formally proposes any rules, it wants to hear howcollectors verify borrowers' information and communicate withconsumers.
Among questions it is asking consumers, banks and thecollection industry is whether there could be privacy concernsor other harm from being contacted by and responding to debtcollectors via text message, social media or otherInternet-based tools.
Regulators have already warned debt collectors in recentmonths against misleading borrowers in their efforts to collectpayments. Wednesday's announcement showed the consumer bureau,which was created in 2010, gradually moving to ramp up scrutiny.
"Now it is time to look closely at how we can improve andmodernize existing measures that were written before theInternet, before social media, and before many other newcommunication technologies," Cordray said.
"We are seeking to hear from the public...about what worksand what does not in the current debt collection market," hesaid.
The consumer bureau was created by the 2010 Dodd-Frank lawand charged with overseeing credit cards, mortgages and otherproducts. After it opened in 2011, the bureau dove into mortgagerules and other Dodd-Frank requirements. With those rules out ofthe way, consumer officials have been broadening their focus.
About one in 10 Americans came out of the 2007-2009financial crisis with some debt in collection, the bureau said.
Debt collectors include banks that try to get borrowers topay them back, as well as outside firms that collect debts onbehalf of creditors.
Some third-party collectors charge lenders a fee to recovermoney from delinquent borrowers. Others buy the debt and keepwhatever they can recover or collect money through litigation.
The consumer bureau began supervising larger debt collectorsearlier this year. It has already warned that it will crack downon collectors who mislead consumers, which is illegal under theFair Debt Collection Practices Act.
Regulators levied a record fine in July on Expert GlobalSolutions, the world's largest debt collection agency,for harassing people who owed money.
Other big collectors include Encore Capital Group Inc and Asset Acceptance Capital Corp.
Consumer bureau staff members did not give a timeline forwhen they might propose rules. They said they would probablyconvene a small business panel to discuss potential rules first.
They said parts of the debt collection law have only beenapplied to third-party collectors so far. New rules could expandborrower protections to cover banks that try to collect debtsthemselves, the officials said.
The bureau began this summer accepting complaints fromborrowers about their treatment by debt collectors and will addthose comments to a database on its website, Cordray said.
He said regulators want to know more about whether rulesgoverning how and when collectors can contact borrowers areadequate. Collection firms reach out to consumers using email,social media sites such as Facebook, and other new technologies.
The bureau also wants to make sure borrowers get clearinformation about debts that are being collected and to hear howoutside collectors ensure they pursue the right consumer for thecorrect amount of money, Cordray said.
Consumers, creditors, debt collectors and others will have90 days to submit information about the industry.
- Financials Industry
- Debt collectors