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By Herb Weisbaum

People being hounded by debt collectors have a new ally.

The Consumer Financial Protection Bureau (CFPB) is now taking complaints about all types of consumer debt collection, including those for credit cards, mortgages, auto loans, medical bills and student loans.

The CFPB will forward your complaint to the collection agency involved, which then has 15 days to respond with what they have done or plan to do. Using this system, the CFPB expects all but the most complicated complaints to be closed in 60 days.

The Bureau also developed five action letters you can use when corresponding with debt collectors. These templates are designed to help you get more information about the collector’s claim, dispute the debt, or have the collector limit or stop contact with you.

“Consumers need options to help them secure fair and respectful treatment from those debt collectors that fail to abide by the law,” said CFPB director Richard Cordray in statement. “They can protect themselves by using our action letters to communicate with debt collectors and by submitting a complaint to us if they believe they are harmed by illegal conduct.”

ACA International, the Association of Credit and Collection Professionals, supports the CFPB’s new role in the complaint resolution process.

“The ability for people to have their complaints resolved by working with a debt collector will have a significant benefit for both the collectors and the consumers,” Mark Schiffman, ACA International’s vice president for public affairs told NBC News. “We’ve long said that given the opportunity to work with a consumer, debt collectors do wonderfully well at being able to resolve these issues.”

Dealing with the bad apples
Debt collection is a multi-billion dollar industry with more than 4,500 collection firms in the U.S.

Collections is part of the free market system, but debt collection complaints are common. Debt collectors generate more complaints to the Federal Trade Commission than any other industry.

(On Tuesday, the world's largest debt collector settled charges brought by the FTC and agreed to pay $3.2 million penalty)

While many debt collectors play by the rules and treat people fairly and with respect, others flout the rules, the CFPB said.

“Our job is to root out bad actors and protect consumers against unfair, deceptive, or abusive practices and other legal violations, which damage both consumers and also every debt collector that tries to operate within the law,” Cordray said in prepared remarks for a public hearing in Portland, Maine.

The CFPB is putting the industry on notice that any company that collects a debt and falls under its jurisdiction will be held accountable for unfair, deceptive or abusive practices. That includes the original creditor, debt collectors hired by the creditor, or third-party collectors that buy old debts.

The CFPB also warned collectors to avoid making statements that could be deceptive, such as telling people that paying the debt would improve their credit score. And it spelled out specific practices that may be illegal. They include:

  • Threatening action that the debt collector does not have the authority to pursue, such as false threats of lawsuits, arrest, prosecution, or imprisonment for non-payment of debt.
  • Falsely representing the character, amount, or legal status of the debt.
  • Misrepresenting that a consumer’s debt would be waived or forgiven if that consumer accepted a settlement offer when the company is not, in fact, forgiving or waiving the debt.
  • Failing to properly post payments or credit to a consumer’s account and then charging late fees.

ACA International says it also wants to get rid of the bad apples because they give the good collectors a bad name.

“As an industry, we believe consumers deserve to be treated respectfully and that collections can be and should be done lawfully,” ACA’s Schiffman told me.

More Information:

  • Submit a debt collection complaint to the CFPB
  • CFPB factsheet about debt collection
  • Student loan borrowers who have been contacted by a debt collector can learn more about their options by using the online web tool Repay Student Debt.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitteror visit The ConsumerMan website.