If you splurged more this year on holiday goodies, you’re not alone.
More than half of Americans planned to boost their holiday spending as part of efforts to shake off the pandemic blues, according to a recent survey. Some said they’d be spending as much as $1,000 more than a year ago.
But about a third of survey respondents acknowledged worries about going deeper into debt — and those concerns are warranted.
Household debt topped $15 trillion for the first time ever in the third quarter, fueled in part by rising inflation, according to the New York Federal Reserve.
Total credit card balances jumped by $17 billion to roughly $800 billion, reversing the more financially cautious behavior that saw many consumers paying down balances because of COVID-19.
That’s not the whole story, though. You should also be aware that rules for debt collectors have changed, and not necessarily in a good way for consumers.
Call it a delayed Christmas present from Donald Trump.
While Trump was president, his business-friendly Consumer Financial Protection Bureau adopted new rules allowing debt collectors to email and text people, as well as follow and message people via social media.
Those new rules finally took effect this month.
Kathleen Kraninger, who headed the consumer agency under Trump despite zero prior experience in consumer affairs, said in a blog post last year that new rules were needed for “a debt collection system that works for consumers and industry in the modern world.”
“Debt collectors and consumers have been trapped in a time warp,” she said. “They have been required to communicate with each other under standards Congress enacted in 1977.”
Although that’s true, consumer advocates warn that unleashing debt collectors in the digital realm may only complicate things for people with financial obligations.
Linda Sherry, a spokesperson for the advocacy group Consumer Action, said the prospect of debt collection via electronic messages may make it challenging for people “to tell whether it’s a real debt collector or a scammer.”
“This could work both ways,” she told me. “They could ignore a real debt collector or they could respond to a scammer, believing it to be a real collection.”
Sherry said an expected surge in cybernotices from collectors “will be very confusing” for many people, “and consumers are going to have to pay very close attention to respond appropriately and ensure their rights.”
I asked the under-new-management CFPB if there’s any discussion at the agency about revising or rescinding the Trump-era rules. No one got back to me.
But Sherry makes a good point: At a time when most people are bombarded daily with emails, texts and social media messages from scammers, adding debt collectors to the mix probably won’t do consumers any favors.
Legit messages may be ignored. Bogus messages may cause people to send money to fraudsters. A whole new level of vigilance will be required from consumers.
In announcing implementation of the new rules last month, the CFPB acknowledged that things are now more complicated for consumers.
“If a debt collector contacts you about your debts, you may have concerns about whether the debt collector is legitimate, whether the debt is yours or if the amount the collector is seeking to collect is accurate,” the agency said.
It reminded consumers that they have rights under the federal Fair Debt Collection Practices Act, which, among other things, makes it illegal for a debt collector to threaten or harass people.
Under the new rules, a collector reaching out via electronic means must clearly identify itself and its purpose, and must specify how the collector can be reached with any questions or disputes.
If a debt collector contacts you via Facebook or some other social media platform, its messages must be private and off-limits to other users.
The collector must be upfront about its intentions before requesting to add you as a friend or contact for direct communication. It also must provide an easy way of opting out if you don’t want any further online messages.
If you’re having an issue with a collector that isn’t following the rules, you can lodge a complaint with the CFPB via its website.
ACA International, a trade group for debt collectors, pushed hard during the Trump administration for the new rules to be adopted.
The group called the ability to email, text and message borrowers “the biggest development in the accounts receivable management industry” in more than four decades.
But as Spider-Man would say, with great power comes great responsibility.
It remains to be seen if debt collectors will use their new cyberfreedom responsibly, or if some, particularly the more unscrupulous ones, will exploit online messaging as a cool new way to badger people into coughing up some cash.
Remember, not all debt is collectable. In California, the statute of limitations for consumer debt is four years. This means a creditor can’t prevail in court after four years have passed.
But if you pony up even a small amount of any obligation older than four years, that’ll restart the debt clock, allowing the collector to once again pursue legal action.
If you have questions about any message saying you owe some cash, you’re entitled by law to request details of the obligation — and to ask if the debt falls within the statute of limitations.
Collectors just gained some powerful new tools. But you’re not defenseless. Know your rights. Use them.