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New rules may help end creditor harassment for consumers

On Behalf of | Dec 26, 2014 | Debt Relief

Some King County consumers may be interested to learn of a recent announcement by the Consumer Financial Protection Bureau. The agency is considering new regulations regarding the way the collection industry goes after consumers for alleged debts that they owe.

One particularly shady strategy they may be revamping is referred to as “withdrawal” by those in the industry and alternatively as “debt laundering” by consumer advocacy groups. The basic premise is that the original creditor farms out the debt to one collection agency after another, each time withdrawing the debt when consumers request validation of its legitimacy or provide proof of payment. This tactic effectively sidesteps the Fair Debt Collections Practices Act that protects consumers from harassment by debt collectors.

Consumers may be called by debt collectors, but if they request the calls to cease, the collection agency must quit calling. The creditor then simply withdraws the debt and begins the process anew with another collection agency, perpetuating the process almost endlessly.

The practice is useful to creditors and collection agencies because often no verification of the debt still exists, especially in cases of years-old debts that have passed through many collectors’ hands. Unverifiable debt can only be collected when a debtor willingly pays up.

The Fair Debt Collections Practices Act was not intended to be a loophole for an endless shuffle of debt from one agency to another. Yet this loophole flouts the original intent of the law, which was to protect consumers from harassment. The National Consumer Law Center has requested that the CFPB implement clauses to prevent this wholesale reselling of consumer debt over and over again. One group proposes that all debt collectors must abide by the collection history in place for each debt, effectively ending the lucrative practice.

Being mired in debt is an unpleasant situation. But consumers do have some legal options available to them. A bankruptcy attorney in Washington may be able to offer some solutions that provide consumers with peace of mind.

Source:, “The Loophole That Lets Debt Collectors Come After You Again & Again & Again…” Dec. 20, 2014

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