Young woman on cell phone looks dubious - debt collectionStates across the country are pushing for tougher consumer protection rules to address debt-collectors' use of cell phones and text messages, as well as better govern what happens when debts are sold on from creditors to collectors.

The same rules that guide the way debt collectors are supposed to communicate with consumers in print should also apply to text messages, cell phones and recorded messages, regulators say. In addition, people in debt can be left less protected after their accounts are sold by the original creditor to subsequent collectors (or, "passive debt buyers").

Massachusetts State Attorney General Martha Coakley has turned her attention to her state's regulations, created in the 1970s. On March 11, she issued a proposal that would change the commonwealth's policies."We have now revised ... regulations to keep up with changes in technology, including cell phones and text messages," Coakley said in a statement. "We have also updated the regulations to close the loophole in the law regarding passive debt buyers so that they must play by the same rules as everyone else."

The amendments include:
  • Regulations meant to prevent abusive collection by phone and print should apply also to newer forms of communication, such as text messages and recorded messages.

  • Rules that govern what constitutes a "household" -- important when determining whom collectors can contact in search of a debtor -- should extend to cells and texts, and must also include considerations of what data-usage fees might be incurred when debtors are contacted.

  • Passive debt buyers, whether they are companies or third-party attorneys, should be classified as creditors, just like the original holder of the debt. The rules that apply to the initial creditor should also apply to subsequent buyers.

  • Debt collectors in Massachusetts would be required to make "good faith" efforts to determine if a debt is too old to be legally pursued, and would have to tell debtors specifically what debts are then discovered to fall into that category.
Coakley's proposed changes have been delivered to the Massachusetts Secretary of State, and will next go before the public as part of a hearing process, this summer. The full proposal can be viewed at the Attorney General's website.

The call for changes comes in the wake of a nationwide prompt to attorneys general by Elizabeth Warren, special adviser to the U.S. Treasury on the Consumer Financial Protection Bureau. She wants state AGs to help the Bureau craft updates to federal debt collection regulations.

In a move that presaged one element of Coakley's proposal, New Mexico Attorney General Gary King announced, in December 2010, that debt collectors in his state would have to disclose details about time-barred debts, those too old to be legally collected, to debtors. The change was set to go into effect this month.

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