Will the Government Protect You From Debt Collector Abuse?

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The Federal Trade Commission's recently released 2011 annual report paints a grim picture of the current state of debt collection abuse - but has high hopes for a new government agency that will potentially add a new layer of protection for consumers.

Money Talks News has been reporting on debt collection abuse for years. Weeks ago we reported that nonprofits like Consumers Union had concluded that the law isn’t strong enough to protect debtors from such abuse.  We also did a story explaining that if you’re abused by a debt collector, you might find a free lawyer.

Now the government is jumping on the bandwagon. The Federal Trade Commission’s 2011 annual report [PDF], released this month as part of the Fair Debt Collection Practices Act, reveals that the agency received more complaints about debt collection in 2010 than any other industry. (For other common complaints, see Tips to Avoid the Top 10 Consumer Problems.)  The 140,036 total complaints about third-party and in-house collectors comprised 27 percent of all complaints received by the FTC last year – and represented an 18-percent increase from 2009.

Worse than the extent of the problem, however, is its consequences for those affected. As the report put it:

Deceptive, unfair,and abusive debt collection practices…cause substantial consumer injury, including payment of amounts not owed, unintended waivers of rights, invasions of privacy, and emotional distress. In some circumstances, illegal collection practices can place consumers deeper in debt.

Take a look at the 9 categories of collection abuse tracked by the FTC last year:

  • Harassing the alleged debtor or others
  • Demanding a larger payment than is permitted by law
  • Failing to send required consumer notice
  • Threatening dire consequences if consumer fails to pay
  • Failing to identify self as debt collector
  • Revealing alleged debt to third parties
  • Impermissible calls to consumer’s place of employment
  • Failing to verify disputed debts
  • Continuing to contact consumer after receiving “cease communication” notice

In addition to investigating and prosecuting collection agencies that violate federal laws, the FTC also protects consumers by educating them via resources like their Debt Collection FAQ: A Guide for Consumers.

Starting this July, the Consumer Financial Protection Bureau – a new agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of July 2010 – will also work alongside the FTC to beef up consumer protection. According to the FTC’s report, the CFPB will have the authority to create debt collection rules as well as collect complaints, conduct related research, and educate consumers and collectors.

In the meantime, check out more stories we’ve done on debt and debt collectors…

Stacy Johnson

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