Facebook Friends Fronting Debt Collectors Draw U.S. Regulation

Kathryn Haralson had already fielded calls from debt collectors at her home and work. They even phoned her daughter at college.

So when Haralson, 47, logged into her Facebook account one day, she was surprised by an unwelcome inbox message: a request to call “Mr. Rice” about her debt.

“It’s not like they needed to go on Facebook to find me,” Haralson said. “I was in contact with them all the time. That crossed the line.”

Federal regulators could wind up agreeing with Haralson as the U.S. Consumer Financial Protection Bureau and Federal Trade Commission weigh new restrictions on how debt
collectors may use social media websites like those run by Facebook Inc. (FB) and Twitter Inc. to contact potential debtors.

The rule is one of a series of actions contemplated by U.S. regulators in 2013 as they impose comprehensive federal oversight for the first time over the debt collection industry, which generated 180,000 consumer complaints to the FTC in 2011. In the 2010 Dodd-Frank Act, the CFPB gained new powers over debt collectors that no other federal agency ever had.

Richard Cordray, the CFPB director, has made debt collection a priority for the agency because about 30 million consumers -- “nearly one out of every 10 Americans” -- have accounts in collection totaling $1,500 on average, he said in an Oct. 24 speech.

“We will be using both our supervision authority and our enforcement authority to oversee the market and go after bad actors who flout the law,” Cordray said.