MAKING YOU PAY?
Still No Reason for Abusive Debt Collectors to Fear
Let's see if I get this right.
If a big financial institution gets into trouble, the
government is ready to step in and bail it out and make
the little guy pay for it.
But if the little guy gets into trouble, and the big
financial institution comes demanding its money back,
not only does the little guy get no relief, but he gets
little to no real government protection when the lender
applies strong-arm tactics to collect its debt. And for
all of the talk of meaningful change in Washington,
abusive collection actions won't be stopped any time
Last week, the Federal Trade Commission issued a report
saying that the debt-collection legal system must be
reformed and modernized "to reflect changes in consumer
debt, the debt collection industry and technology." The
idea is to put more bite into the Fair Debt Collection
Practices Act, and the problem is that the moves being
discussed are more like a wink and a smile than a growl
at the bad guys.
The FTC took in roughly 105,000 complaints about
third-party and creditor debt collection in 2008,
according to numbers released last week. That makes it
the subject generating the second most complaints --
identity theft is No. 1 -- about one in every 11 that
the agency receives.
The Fair Debt Collection Practices Act was enacted in
1977 to protect the public from abusive, unfair and
deceptive practices by debt collectors, with the FTC
made the primary enforcer of its rules and regulations.
The rules have been tweaked over the years, but the
premise has always held steady: Debt collectors are
entitled to do their job, but not by badgering,
pestering, brow-beating and intimidating the debtor.
Judging from the complaints -- and FTC officials have
long acknowledged that few people who have any problem
go to the trouble of filing a complaint -- a multitude
of consumers believe they're not being treated within
the spirit of the law.
The trade commission recommended last week that
collectors need to use available resources to both
obtain better, more accurate information about their
targets, while also giving those people more
information. To that end, the agency suggested the
following changes to the Fair Debt Collection Practices
"Validation notices" that the collectors are required to
send must disclose the name of the original creditor;
break down the debt by principal, total interest, and
total fees; and inform consumers of certain rights they
already have under the FDCPA. Currently, consumers get a
notice from a collector and may not know who that
collector represents, which makes it hard to determine
what they owe, what additional fees or charges have been
thrown in there or how to properly proceed if they want
to fight the collection effort.
Modernize the law to reflect changes in technology -- so
that debt collectors can contact consumers on cell
phones and by text message -- but only in cases where
the consumer does not incur any charges for these
contacts. In other words, they want to put an end to the
abusive practice of a collector using up the consumer's
minutes or texts, or even threatening to run up the
communications bill -- so that service might get cut off
-- in an effort to get the delinquent credit bills paid
Further, under the proposed changes, collectors should
only be able to use cell phone or text message with
prior consent. Expect this to be a fine-print addition
to credit applications, where the firm consumers sign up
with will ask for the information and for permission to
contact the consumer in the event of any "problems" with
the account; while the customer thinks "they'll call my
cell phone if they see problem activity on my credit
card," the card issuer is thinking "get that information
in case this account goes bad."
Finally, when collectors are given access to a
customer's other accounts to pay a bill, they will need
to obtain "express verifiable authorization" from
consumers before using electronic transfers to reach in
and get their money.
Also in the FTC's suggested changes to debt-collection
laws is a request for Congress to let the agency have
the authority to change the act going forward, allowing
it to keep pace with changes in the financial world.
It all amounts to a baby step's worth of progress,
largely because there's still nothing in the Fair Debt
Collection Practices Act to give it teeth.
Congress wrote this legislation in such a way that it
expected civil lawsuits rather than law-enforcement
actions to be the primary means of making sure the
industry complies with the rules. The FTC can pursue
cases, but it is extremely limited in the way it can
punish an abuser.
While civil suits have resulted in some victories for
consumers, the truth is that collectors aren't scared.
They're not going to jail, they're not losing massive
profits; the worst offenders are often down the line
from management, and it's usually the company -- and not
the bad actor hounding a consumer -- which takes the
Dealing with debt collectors for a column last year I
encountered a variety of behaviors that appeared outside
the lines of the law, but where the collector suggested
they were within their rights and basically dared the
customer to sue.
Collectors understand that they are dealing with people
for whom the collection issue is just one problem;
arranging for an attorney to represent them in a
consumer case is not necessarily realistic.
With that in mind, collectors know they can flout the
laws or live on the edges, knowing that their behavior
may result in better results, returns so good that they
can afford to pay any fines or problems they encounter.
What's more, collectors can -- and do -- buy a database
of consumers who have filed suits, helping them to avoid
We need some real teeth behind the regulation, and we
didn't get that here," says Gerri Detweiler, co-author
of "Debt Collection Answers: How to Use Debt Collection
Laws to Protect Your Rights." "People can file civil
suits to protect themselves and they might even be able
to put really abusive collectors out of business, but
that doesn't stop the ongoing abusive collections
practices. ... There are not enough enforcement actions
against debt collectors; the changes are positive, but
they won't really change that, and until collectors
really fear the regulators, they'll keep doing whatever
they can get away with that helps them collect the