Debt Collection and Debt Settlement

Looking Ahead to 2026

As the Consumer Financial Protection Bureau (CFPB) continues to reduce its functions in 2026, we expect even fewer enforcement actions by the agency in the debt collection and settlement space.

Key Trends From 2025

Throughout 2025, Goodwin tracked nine enforcement actions concerning debt collection, a significant drop from the 16 actions tracked in 2024. Of those actions, six were handled by the Federal Trade Commission (FTC), indicating that the FTC may be filling the enforcement gap left by the CFPB. The actions focused on student loan debt-relief schemes and “phantom” debt collection practices, in which debt collectors attempted to recover fabricated debts that consumers did not actually owe. 2025 also witnessed a heightened focus on medical debt, with states such as Maryland promulgating debt collection laws in this specific area.

In the News

CFPB Scales Back Supervision and Enforcement

In 2025, the CFPB’s overall scaling back of operations impacted the debt collection and settlement industry. This scaling back notably included the narrowing of the “larger participant” definition.

In August 2025, the CFPB proposed a rule that would amend the Consumer Debt Collection Larger Participant Rule to increase the threshold amount for determining a larger participant from $10 million in annual receipts derived from debt collections to $25 million, $50 million, or $100 million. If ultimately implemented at the $100 million threshold level, this change would remove approximately 95% of existing entities from federal supervision, though the majority of market revenue in this area would still be covered. The deadline for submitting comments closed on September 22, 2025, and the CFPB has yet to issue a final rule.

FTC Enforcement

While the CFPB reduced its enforcement efforts, the FTC continued enforcement activity in this space, securing major settlements with debt collection companies accused of violating the Fair Debt Collection Practices Act (FDCPA) and the FTC Act.

FTC Enters Proposed Final Order Banning Debt Collector Involved in Alleged Debt Collection Scheme

In May 2025, the FTC announced that it had entered a proposed final order with debt collector Global Circulation Inc. and its owner, which resolved allegations that the company had engaged in an unlawful debt collection scheme. According to the FTC’s amended complaint, the debt collector had used threats of arrests, lawsuits, and wage garnishment, among other behaviors, to influence customers to pay debts that they did not actually owe, in violation of the FDCPA and FTC Act. The FTC also alleged that the debt collector and its owner violated the FTC’s Impersonation Rule by falsely identifying themselves as affiliates of certain lenders with the intent of deceiving consumers into paying the false debts. Under the terms of the settlement, the owner agreed to (i) no longer participate in debt collection and (ii) pay a money judgment in excess of $9.6 million. A final permanent injunction and monetary judgment was entered by the court on May 9, 2025, which provided that any settlement money received as a result of the order “may be deposited into a fund administered by the FTC […] to be used for consumer relief,” including redress to affected consumers.

FTC Reaches Settlement With Operators of Student Loan Debt-Relief Company

In September 2025, the FTC announced it had reached settlements with the individual operators of debt-relief company Superior Servicing, among several others, which resolved allegations that the operators and their company operated “an illegal student loan debt-relief operation.” Specifically, the FTC’s amended complaint alleged that the company (i) feigned affiliation with the U.S. Department of Education and its loan servicing agents and (ii) collected advance fees purportedly to be paid toward their student loan balances when in fact the operators were directing those payments to themselves in violation of section 5(a) of the FTC Act and section 310.4(a)(5)(i) of the Telemarketing Sales Rule. Pursuant to the settlement, the defendants agreed to pay more than $45 million and permanently cease operations in the debt-relief industry.

State Enforcement and Regulation

The following state attorneys general and financial regulators stepped into the enforcement gap created by the CFPB’s reduced activity in 2025.

California

The California Department of Financial Protection and Innovation (DFPI) issued final regulations under the Debt Collection Licensing Act, affecting debt-collector licensing and reporting requirements. The final regulations increased the annual reporting requirements of debt collectors in California and amended how debt collectors must calculate the amount of net proceeds for reporting purposes. Debt collection licensees must now report to the DFPI the total number of debtor accounts in (i) California that were recovered in part or in whole; (ii) the state for which collection was sought but no debt was recovered; and (iii) the state held in licensees’ collection portfolios.

Maryland

The Maryland Office of Financial Regulation issued guidance on the General Assembly’s passage of a trio of new laws concerning the collection and reporting of medical debt. House Bill (HB) 428 requires collectors of medical debt to include in their complaint that “the judgment sought is for medical debt.” HB 1020 prohibits debt collectors, as well as medical service providers, from disclosing medical debts to consumer reporting agencies. Finally, HB 268 maintains the three-year statute of limitations for the collection of hospital debt in Maryland and prohibits hospitals from reporting medical debt to consumer reporting agencies or filing actions to collect debts that total less than $500, among other protections.

Massachusetts

On July 17, 2025, the state senate passed the Debt Collection Fairness Act (DCFA), which proposes to update consumer protection provisions that were deemed to be outdated, including by increasing protection for wages subject to garnishment and reducing the interest rate on judgments of consumer debts. The DCFA now awaits passage in the Massachusetts House and signature by the governor before it becomes law.

New York

The New York Department of Financial Services added a top former CFPB enforcement official to its Consumer Protection and Financial Enforcement Division, enhancing its capacity to investigate large debt buyers and fintech lenders.

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Read the next chapter, “Payday and Small-Dollar Lending.”