Monday, January 30, 2012
WASHINGTON, D.C. — The Federal Trade Commission announced a $2.5 million fine against one of the largest debt buyers in the country for using deceptive practices to collect old debts. Asset Acceptance, LLC has agreed to inform consumers that it will not sue to collect debts that are too old to legally collect. Consumers Union, the nonprofit advocacy arm of Consumer Reports, applauded the FTC’s action but noted that new reforms are needed to protect consumers from unfair debt collection abuses.
“Debt collection abuses have become increasingly common as more and more debt is bought and sold,” said Suzanne Martindale, staff attorney for Consumers Union. “Some debt collectors unfairly target consumers even when the statute of limitations has passed or when they don’t have the proper documentation to prove the debt is owed. It’s time to rein in debt collection abuses with some common sense rules that protect consumers from unfair harassment.”
The FTC’s complaint against Asset Acceptance LLC alleged that it failed to disclose to consumers that some debts it attempted to collect were time barred because the statute of limitations had passed. The complaint also alleges that the company provided negative information to credit reporting agencies that it knew or should have known was inaccurate and failed to conduct a reasonable investigation when the negative information was disputed.
In 2011, Consumers Union issued a report on debt collection abuses with the East Bay Community Law Center (EBCLC). In the report, the groups highlighted how debt collectors are filing an increasing number of lawsuits against consumers even though often they don’t have proof to back up their claims. Without the proof, debt collectors may sue on invalid debts, such as those that have already been paid.
The problem is made worse when consumers don’t receive timely notice that they have been sued on the debt or when the debt is so old that the consumer does not have good records to show whether the debt is owed or the amount claimed is correct.
To address widespread debt collection and debt buying abuses, the report by Consumers Union and the East Bay Community Law Center urged courts, states and federal regulators to enact a number of reforms, including:
End robo-signing and attempts to collect without proper documentation: Debt collectors should be required to document that they are attempting to collect from the right person, for the right amount, and on a debt that they can lawfully recover.
Establish a sell by date for all debt: It should be illegal to sell or attempt to collect debt that is more than seven years old, which is too old to be reported on a credit report under the federal Fair Credit Reporting Act.
Require debt collectors to provide more information to consumers: All debt collectors, including debt buyers, should be required to identify the name of the original creditor and to provide an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, and to provide detailed records about the debt to consumers within five days after the first notification.
Require debt collectors to submit more detailed information when filing suit: Debt collectors should be required to submit basic information about the debt, including the name of the original creditor and an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, when they sue over a debt, so that the consumer can see if it is his or her debt, and in the right amount.
Increase oversight to ensure consumers are properly notified of lawsuits: Courts should be required to provide supplemental notice of all filed debt collection lawsuits to debtors and default judgments should be prohibited if the notice is returned to the court as undeliverable.
Contact: Michael McCauley, firstname.lastname@example.org, 415-431-6747, ext 126