During these difficult economic times, legal services providers have experienced a dramatic influx of requests from clients like Emily who seek assistance in defending improper lawsuits brought by debt collectors. In addition, consumers like Yvonne continue to be hounded years after they settle their debt by unfamiliar collection agencies with little information about the debt. These experiences illustrate problems inherent in the current debt collection system. There is a massive industry buying and selling large portfolios of debt for pennies on the dollar, and a court system in which debt collectors are able to get court judgments without proof that they own the debt or even that the consumer owes any debt.
Policymakers at both federal and state levels must act to create better substantive and procedural safeguards for courts and consumers in debt collection litigation. The federal Fair Debt Collection Practices Act (FDCPA),1 state fair debt collection laws, and court rules need to be amended to reform debt buying and debt collection industry practices. The new Consumer Financial Protection Bureau will also have the authority to write new rules under the FDCPA to rein in the worst abuses of the debt collection industry. This report describes problems with the debt collection and debt buying industries, provides real-life consumer stories exemplifying these problems, and makes policy recommendations to reform debt collection litigation and other debt collection practices.
For the full report, click on the link above (PDF format).