Fighting Back Against Debt Collectors

 Debt collectors have a talent for hassling consumers –even those who don’t deserve it. According to the Federal Trade Commission, complaints about debt collectors rose by 17 per cent to 140,036 in 2010, nearly triple the number lodged in 2002. Situations regarding collectors account for 27 per cent of all FTC complaints.

The problem is not just a federal one; state agencies also receive complaints about collectors. Reportedly in South Carolina alone, 54,147 consumers indicated that they were harassed nonstop by collectors.  Of those filing complaints, 4,182 said that collectors went so far as to threaten violence.  The South Carolina Department of Consumer Affairs says that debt collection was the top consumer complaint category in the state.

To date, the largest case against collectors occurred in March when West Asset Management, one of the leading accounts receivable companies in the country, settled with the Federal Trade Commission at a cost of $28 billion. The FTC had the company under heavy scrutiny for years after receiving 1,000s of complaints about harassing phone calls. Among the reasons for the complaints were the use of obscene language and inaccurate reporting of debts.  As a result of the steep fine, all employees at West Asset Management must now sign disclosures delineating specifically what their duties and liabilities are under the law.

The current Fair Debt Agency is limited on some of the policies that they can enforce. For example, the agency can’t physically block firms from collecting debts. In addition, they can’t create new rules, such as policies pertaining to contact on cell phones, emails and voicemails from collectors.  The regulator’s primary goal is to prohibit abusive practices such as harassment, lies and intimidation.

The FTC currently seeks to help victims of abusive collections practices through educational “Facts For Consumers” brochures. The pamphlets discuss specifically what collectors may do to recover debts.  The brochure makes it clear to consumers that collectors may never use threats of harm and violence, false statements or obscene language. They may also not threaten to publish a list of consumers who are unable to pay debts.

Educating consumers is necessary.  Last year, 30% of consumers that filled out a debt collection complaint stated that they had never received any form of written communication about their debts.  The majority of consumers aren’t even aware that they can argue a collection notice in writing. 

Debt collectors might finally be put in their place when the Consumer Financial Protection Bureau rolls into action on July 21st. The new Agency has the power to aggressively investigate complaints and also write new rules. When it launches, the Consumer Financial Protection Bureau will further examine debt collection policies.