Some employees may benefit from better understanding of their rights as consumers. They may also be more likely to engage with benefits programs and options if they have more understanding how information flows from creditors to credit reporting agencies.
One of the bigger hurdles many employees face in saving for retirement is their relationship to their consumer debt. Many Americans believe that this debt is an impediment to building their emergency funds and saving for retirement. As sponsors move towards auto-enrolling employees as part of onboarding them, they may want to help those employees with the anxiety or concern they have about that debt. One method for helping them with their relationship to that debt is to provide educational resources for them about their options. Some businesses do this through an Employee Assistance Plan or EAP. Some of those plans include consumer debt counseling. However, some employees may benefit from better understanding of their rights as consumers. They may also be more likely to engage with benefits programs and options if they have more understanding how information flows from creditors to credit reporting agencies.
The Consumer Financial Protection Bureau (CFPB) has been issuing new rulemakings on credit reporting during the pandemic. “The CFPB aims to makes rules governing consumer finance markets more effective and to create new rules when warranted.”[1] Their website offers consumer education on a variety of commercial topics, including debt collection and frauds and scams, but also on auto loans, money transfers, payday loans, credit cards and credit reporting. Their work on rulemaking covers these topics too. A few of those new rules took effect in 2021 that may have missed employee’s notice as their attention was otherwise engaged.
On credit reporting, as of November 2021, consumers now have a little more protection concerning what gets reported to the main credit reporting agencies. The new rule now “says that a debt collector can't report a debt to the three major credit reporting agencies, Equifax, Experian, and TransUnion, before first contacting the consumer.” Instead, the debt collector has to either contact the consumer in person or by phone or contact them electronically. Only after they do not get a response within in a “reasonable period of time" can they then report information to the main credit reporting agencies.
Another helpful rule that is in development from the CFBP concerns late fees on credit cards. Announced in late January of 2023, a new rule would limit late fees on credit cards. The CFPB’s new rule would take steps to “ensure that the late fees charged on credit card accounts are “reasonable and proportional” to the late payment as required” under the Truth in Lending Act.[2] “The proposal would (1) adjust the safe harbor dollar amount for late fees to $8 and eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type; (2) provide that the current provision that provides for annual inflation adjustments for the safe harbor dollar amounts would not apply to the late fee safe harbor amount; and (3) provide that late fee amounts must not exceed 25 percent of the required payment.”
Employees may find some ease in learning how they can pursue their rights when creditors do not follow the rules. The CFPB is also a source of consumer protection advocacy. In addition to other agencies, like the Federal Trade Commission and private consumer advocacy groups, like the better Business Bureau, the CFBP can help consumers take action on their own behalf.
Employees may want to explore this information on their own. Plan Sponsors may find putting information about the CFPB in spaces employees can find on their own would be helpful. This could be in a financial wellness space, where other budgeting information is located, or in employee training space, such as where cybersecurity or compliance materials are housed.
[1] https://www.consumerfinance.gov
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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