In August 2023, the CFPB started accepting complaints about rental debt collection. From August 2023 to the end of that year, the CFPB received more than 1,700 rental debt complaints. In the United States, rental debt is estimated to be more than $9 billion, with over 4.5 million households behind on rent payments. Rental debt collectors often charge renters collection fees in addition to the unpaid rent itself. As the CFPB has observed with medical debt, many debt collectors furnish rental debt to credit reporting companies to collect debt through coercion.
The complaints submitted by consumers and the CFPB’s research show that the infusion of consumer financial products and services into the rental market raises risks for renters, including improper debt collection due to:
Illegal price-fixing: Law enforcement officials in several states and individual renters have alleged that illegal price-fixing has driven rapid rent increases. Landlords and management companies may have used “revenue management software” to collect improper amounts that ultimately end up in debt collection. Debt collectors collecting on bills inflated due to illegal price-fixing may violate the Fair Debt Collection Practices Act.
Tacked-on rental fees: Renters and landlords have complained to the CFPB about rental junk fees, including fees from rental payment processing services added onto and required as a condition for rent payment. It is often unclear whether these fees are allowed under the lease agreement or local law and, thus, can be targeted by debt collectors.
The CFPB is taking steps to ensure that debt collectors follow consumer financial protection laws, including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.
(Source: CFPB press release)
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(C) 2024 Jeff Sorg
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