FTC Report February 2009 On Collecting Consumer Debts – Part Two


This continues our series on reviewing and summarizing the FTC Report issued last month about changes needed to the Fair Debt Collection Practices Act (FDCPA). In our first post we addressed the purpose of the report and in this post we will look at the Executive Summary of the report that deals with the five conclusions and proposals of the FTC.

Here is the ultimate conclusion of the Federal Trade Commission – “the debt collection legal system needs to be reformed and modernized to reflect changes in consumer debt, the debt collection industry, and technology.”

There are five basic conclusions and proposals as follows:

1. “Major problems exist in the flow of information within the debt collection system.” The FTC proposes and concludes that debt collectors (collection agencies, collection lawyers, and debt buyers) must have better information so that they will only collect from the correct people and only collect the correct amounts. The commission also found that debt collectors must do a better job of educating consumers of their rights under the FDCPA. Unless we know our rights under the law, we are at a serious disadvantage and are vulnerable to falling prey to abusive debt collectors.

2. “Debt collection laws need to be modernized to take account of changes in technology.” It makes sense that debt collectors should be able to contact consumers through a variety of means as long as the collectors don’t cost consumers by contacting them (i.e. text messages, cell phone calls, etc) and payments should be allowed through newer technology as long as the debt collector has “express verifiable consent from consumers before accessing their accounts.”

3. “Certain debt collection litigation and arbitration practices appear to raise substantial consumer protection concerns.” We see this widespread problem in Alabama where debt buyers are filing suits without any proof and showing up to court with no proof. Arbitration, particularly in the National Arbitration Forum (NAF) appears to be very unfair to Alabama consumers. The FTC stated it does not have enough information to make a decision but will be meeting with all concerned parties including state officials. We trust that the FTC will learn the extent of the epidemic of frivolous lawsuits filed by debt buyers.

4. “Debt collection law must evolve to include a regulatory process that ensures that legal requirements keep pace with changes in the marketplace.” The FTC wants the ability to issue regulations to implement the FDCPA without having to wait for the entire congress to act. This makes sense.

5. “Debt collection law enforcement must be pursued aggressively to deter collectors from engaging in conduct that harms consumers.” This is critical – the FTC writes “Private actions [consumer lawsuits], not FTC actions, were intended to be and should continue to be the main means of promoting industry compliance with the FDCPA.” We agree – consumer lawsuits are the best and most efficient way of forcing collectors to comply with the law. One way to increase the effectiveness is to increase the statutory damage amount from $1000 to the equivalent amount in today’s dollars, adjusted for inflation since 1977. A thousand bucks is not what it was in 1977…. The FTC also stated it will be more aggressive in suing abusive debt collectors which is an excellent idea.

We will continue this summary of this very important report released by the FTC on the FDCPA and the collection industry. Contact us if you have any questions or comments.

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