March 21, 2011
WASHINGTON, D.C. – A new report issued by the Federal Trade Commission (FTC) today found that the agency received more complaints from consumers about debt collection than any other single industry. The report shows that current law fails to address rampant debt collection abuses and leaves consumers vulnerable to being harassed for unsubstantiated debt, according to Consumers Union, the nonprofit publisher of Consumer Reports.
The FTC found that the most common complaints involved repeated and continuous phone calls from debt collectors, false claims about the amount and status of the debt, and the failure to provide consumers with legally required notices describing their rights.
“Debt collection abuses have gotten worse as more debt is bought and sold and debt buyers have unfairly targeted consumers with an increasing number of lawsuits,” said Gail Hillebrand, director of Consumers Union’s Defend Your Dollars campaign (www.defendyourdollars.org). “It’s time to enact some common sense reforms that protect consumers from being harassed for debt that has been paid off or that they don’t even owe. Reining in debt collection abuses with new rules should be a top priority for the new Consumer Financial Protection Bureau once it is up and running this summer.”
Earlier this year, Consumers Union issued its own 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 state 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.
Michael McCauley – 415-431-6747, ext 126, mccami@consumer.org