If you’ve ever owed money, you know that getting a call from the debt collector is never fun. Debt collectors often use unorthodox methods to pressure consumers into making payments. As a result, the industry has come under increased scrutiny for its tactics and business practices. One concern: a recent report by the Consumer Financial Protection Bureau found that of the 30,300 complaints they received between July and December of 2013, the most common complaint (34 percent) involved consumers being harassed for debts that they did not actually owe.
These complaints consisted of consumers asserting that the debts being collected were not theirs (65 percent), had already been paid (27 percent), were a result of identity theft (5 percent), or were previously discharged during bankruptcy (4 percent). Consumers also complained that the amounts being collected are inaccurate or downright unfair.
Other issues include unreasonable communication tactics (23 percent), such as frequent calls, threatening calls, calling before 8 a.m. or after 9 p.m. hours, taking/threatening unwarranted legal action (collectively 14%), and false statements or representations (9%).
“One of the biggest problems we see in the debt collection industry is that collectors misrepresent who they are and what they are doing to coerce consumers into making payments,” wrote Federal Trade Commission Public Affairs Specialist, Betsy Lordan in an e-mail interview. “Collectors who fail to identify themselves as debt collectors may also pretend to be law enforcement agents or attorneys, and may threaten arrest or lawsuits, when they don’t have the intent or the authority to follow through on these threats.”
The Fair Debt Collection Practices Act was implemented in 1996, and clearly lists what tactics debt collectors cannot use, yet the CFPB and FTC are still receiving complaints of unlawful conduct. The FTC also lists what practices are off limits to debts collectors.
“The law requires that within five days after first contacting consumers, debt collectors must send a validation letter stating the name of the creditor owed, how much money the consumer owes, and what steps consumers should take if they don’t believe they owe the debt,” said Lordan.
The CFPB report goes on to say that out of the 30,300 complaints received, about 11,000 (36 percent), were sent to companies for their review and response. The rest of the complaints were sent to regulatory agencies and other complaints are either incomplete or still pending with the consumer. Companies have responded to over 80 percent of the complaints (around 9,000) and have disputed 17 percent of the allegations. Important steps have been taken to protect consumers from unfair and illegal debt collection. These include:
- The implementation of Advance Notice of Proposed Rulemaking (ANPR), which allows the CFPB to collect information on a variety of issues, such as the information used by debt collectors, their communications, tactics, and more;
- The CFPB’s filing of lawsuits against companies for unlawful debt collecting conduct; and
- The Bureau’s publication of sample letters that consumers can use to respond to debt collectors.
“Consumers should never be hounded about debts they do not owe,” said CFPB Director Richard Cordray in a press release. “We will not tolerate companies harassing consumers or threatening illegal actions in the debt collection market. We will continue to work hard to ensure that consumers are treated with dignity and fairness.”