Debt Collections Informative - FTC Proposes Significant Changes to FDCPA

Review by D. on 2009-02-27
The Federal Trade Commission Thursday proposed a handful of changes to the Fair Debt Collection Practices Act (FDCPA) that could have a major impact on the accounts receivable management industry, including increasing damages for FDCPA suits, restricting collectors from calling mobile phones or texting, and laying out specific criteria for information in a debt validation notice.

In its long-awaited report from a debt collection workshop held in October 2007, the FTC said that “the nature of consumer debt has changed in numerous important ways since enactment of the FDCPA.” The Commission noted that the most significant change in the ARM industry is the growth in debt buying.

To bring the FDCPA current with changes in the industry, the FTC made a number of proposals for changes to the law that governs collector behavior:

* Debt collectors should provide better information to consumers in a debt validation notice, including: (1) the name of the original creditor; and (2) itemization of (a) the principal, (b) the total of all interest, and (c) the total of all fees and other charges making up the debt.

* Require that debt collectors inform consumers in validation notices that (1) if they send a timely written dispute or request for verification, the debt collector must suspend collection efforts until it has provided the verification in writing; and (2) if they request in writing that the debt collector cease contacting them, the collector must comply.

* The statutory damages awarded under the FDCPA should be increased to account for inflation.

* The FTC should have regulatory authority under the FDCPA.

* The law should generally prohibit debt collectors from contacting consumers via cell phones. However, the Commission also concludes that debt collectors should be permitted to contact consumers on their cell phones if, among other things, they have obtained prior express consent to such contacts. The report also notes that “The FTC believes that debt collectors generally should be allowed to use all communication technologies, including new and emerging technologies, to contact consumers.”

Read the full FTC report at http://www.ftc.gov/bcp/workshops/debtcollection/dcwr. pdf.

The report is the result of comments and testimony provided in a two-day workshop held in Washington in October 2007 (“Mixed View of Industry by FTC Chief at Workshop,” Oct. 10, 2007 and “Collectors, Consumers Disconnect at FTC Workshop,” Oct. 11, 2007). The workshop was designed to get input from various parties on the direction of the debt collection industry and the FDCPA.

The FTC also noted that the information system used by debt collectors to obtain debtors’ contact information must be updated and improved, but offered no specific proposals.

Rozanne M. Andersen, executive vice president and general counsel at ACA International, an ARM industry trade group, agreed that information flow within the industry should be addressed. “Debt collectors and debt purchasers need to have better access to adequate information about the debts they are asked to collect or which they purchase so they can effectively respond to consumers who request information about their just debts,” she said in a statement.

The Commission also felt that some of the litigation and arbitration practices employed by the ARM industry were in need of change. But “because the workshop record does not contain adequate information for the FTC to determine the nature and extent of these concerns, the agency will convene regional roundtables this year with state court judges and officials, debt collectors, collection attorneys, consumer advocates, arbitration firms, and other interested stakeholders to obtain more information about these concerns and develop possible solutions.”

Although the FTC recommended that statutory damages under the FDCPA be updated to reflect inflation, it did not offer a suggested amount. The report did note that the $1,000 cap put on violations in 1977 would be about $3,600 in 2008 dollars. The FTC said that it still believes the FDCPA is best enforced by private suits and class actions, a central rationale for increasing damages.

But the FTC also noted that it has increased its own enforcement actions, with four major actions in 2008 and three in 2007, and that it will “continue an aggressive law enforcement program that will increase compliance with the law.”

In addition to specific requirements on information shared in validation notices, the FTC proposed a new rule stating that “if a consumer disputes a debt, the debt collector must undertake a ‘reasonable’ investigation that is responsive to the specific dispute the consumer has raised.”

“In more than 30 years since the FDCPA was adopted, the law has changed very little, while consumers’ use of credit and the environment in which the credit and collection industry operates have changed substantially,” said Gary D. Rippentrop, ACA International’s chief executive officer, in a statement. “We’re pleased to see the FTC incorporated numerous comments and testimony from ACA members and staff into their report and recognizes the need to address technological advancements in the collection industry for the benefit of consumers and the industry.”

by Patrick Lunsford
insideArm staff
February 27, 2009
Comments:30 Replies - Latest reply on 2009-03-02
Posted by nanomarket on 2009-02-27:
Thanks for the info.
Posted by BokiBean on 2009-02-27:
This is great news.
Posted by D. on 2009-02-27:
There are still alot of issues about the cellphone use...they're gonna have to look further into that one.
Posted by BokiBean on 2009-02-27:
(2) if they request in writing that the debt collector cease contacting them, the collector must comply.

--- wonder if that means all forms of communication?
Posted by D. on 2009-02-27:
Yes, but some people just want to be contacted by mail and not phone..so they would specify that..otherwise it is cease all communication.
Posted by Anonymous on 2009-02-27:
Are you having bill collector problems Boki?
Posted by D. on 2009-02-27:
Are the bill collectors having Boki problems? LOL!
Posted by BokiBean on 2009-02-27:
Yeah, that's what I was talking about. Right now, as I understand it, people can tell them to quit calling and they can still communicate via mail.

Wow, that might amp up the creditor lawsuits, if they have no means to communicate with debtors at all!
Posted by BokiBean on 2009-02-27:
Hahaha! :D
Posted by ejack053824 on 2009-02-27:
Very informative!!! (VH)
Posted by ejack053824 on 2009-02-27:
I keep getting calls from some douche debt collector looking for some girl named Kelly. I've told this horses ass 3 times there is no one here by that name and they insist she is. Next time its going to get real nasty!
Posted by D. on 2009-02-27:
Tell them Kelly had a sex change, then give them your CO's number.
Posted by Soaring Consumer on 2009-02-28:
I am glad that the FDCPA is getting some really good updates.

Ejack, send them a cease-and-desist letter in certified mail. If they continue calling sue for harassment.
Posted by Slimjim on 2009-02-28:
While I know debt collectors can be off the charts sometimes, I find these proposals' timing a bit bad.
Banks need my tax money to keep from going under because of credit card debt skippers. People need my tax money to pay their mortgage that they never could afford and shouldn't have applied for or gotten, while I pay mine diligently.
Now lets make sure debt collectors have a harder job recovering owed money from those who already are stiffing the banks and killing our economy.
Posted by Anonymous on 2009-02-28:
Now Slim you're smarter than that and you usually assign blame to the proper party. Banks need your tax money because they the bank made poor business decisions, believed in the myth of big rewards with zero risk hedge funds based on credit swaps and crazy derivative schemes and leveraged themselves 40 to 1 or even higher.

Good post Basher.
Posted by DigitalCommando on 2009-02-28:
The loans to un-qualified persons should have never been created and made available by the lending industry to begin with, so why do you put all the blame on those who took them? If I stood on the street corner handing out 100 dollar bills and eventually went broke, should I then blame the people who took the money for my foolish mistake?
Posted by BokiBean on 2009-02-28:
Even for qualified people there was this kind of land grab feel for a while in the banking world.

I was astounded with the amount of money that we could have borrowed when we were house hunting. I STILL think it was an unrealistic amount and am glad we stuck to our guns and got the kind of house payment that we could afford, rather than the kind of house payment the banks wanted to give us.

I actually had to fire a realtor because she kept showing me gorgeous houses that I did NOT want to make a note on every month...I knew how much we could safely pay monthly on a house, she knew how much the banks were willing to lend and you just couldn't steer her away from that idea in her head that "more was better".

Frankly, I think it was an industry-wide approach to home loans, and its helped land us in the mess we (as a country) are in today.

That said, I get really annoyed thinking about people who actually fell for the BS and got into homes that they HAD to know they couldn't afford.
Posted by Nohandle on 2009-02-28:
Banks very well made a number of unwise business decisions, but were they not encouraged to provide loans to those not otherwise able to finance a home? Were they not encouraged to provide loans because everyone "deserved" a home and a nice one at that. At one time an individual had to provide a personal financial statement as proof that he qualified for a loan and was capable of repaying that loan based on his income. If he hit upon hard times later, unfortunately that was too bad. Homes were repossessed and I don't recall a demand for help from the Government that taxpayers should assist an individual who found himself in that situation.

The subject at hand? At some point there will be no debt collectors as we know them today. Already we have in place to not contact a debtor at his place of business, do not call within certain hours at his home and probably a number I'm not aware of. Work out something if you owe a debt. Too many have no intention of repaying a loan and hide behind the laws as they change daily. If the debt collector has the wrong telephone number, whether landline or cell, yep put them to a stop. No telling how many deadbeats deliberately provide the wrong telephone number to the creditor.
Posted by Slimjim on 2009-02-28:
Hold on guys. I'm aware the banks irresponsible and aggressive lending carries blame, no doubt. That doesn't mean, however, those that took the money get somewhat of a pass. Many right now are using the excuses of "economy, job security worries, no one else is paying, lets see if Obama bails me, etc., to be very loose with regards to their obligations.
I will say this, I love all the complaints here about reduced credit lines. The lenders are reversing their path of errors that everyone is blaming them for, and yet, everyone is blaming them for cutting down available credit to those WHO ARE (possibly) A RISK to pay it back.
Damned if you do, damned if you don't.
Posted by Slimjim on 2009-02-28:
Well said NH. Not everyone being called by a collector has no means to take care of what they borrowed.
Posted by BokiBean on 2009-02-28:
I don't believe in get-out-of-debt-free passes either. Lately, the economy has been an easy excuse for people who got themselves into their own drama.
Posted by ejack053824 on 2009-02-28:
I think next time I get that call I will say, "yeah this is Kelly..WTF do you want!?" If they say I owe this and that I will just tell them to stick the bill up their ass and sue me. CLICK.
Posted by D. on 2009-02-28:
Boki...what I loved was the excuse I used to get, "I've been laid off since last month"...but they have not paid the bill for six or seven months...that excuse don't fly with the Basher! That may explain why it wasn't paid last month, but what about the months before when they WERE working...I tell them, "Well you didn't pay when you were working either"...that's when they tell me it's none of my business and hangs up on me...LOL!
Posted by jktshff1 on 2009-02-28:
ejack...I have done that...don't go click, wait for the reaction..it's usually priceless. Then promise them anything in the name of Kelly!!
Posted by BokiBean on 2009-02-28:
DB, its those kinds of people who will actually start believing themselves after a while! Kinda like our friend last night. :D
Posted by D. on 2009-02-28:
I miss LuLu already!
Posted by BokiBean on 2009-02-28:
I'm thinkin' we haven't seen the last of her.
Posted by ejack053824 on 2009-03-01:
Jktshff1...thinking about it, I might do as you suggest. LOL!! Poor Kelly will have all kinds of heat brought down on them. I have taken messages for Kelly saying he/she is on vacation in Lake Tahoe and won't be back for a month. The collector gets really pissed then. LOL!
Posted by BokiBean on 2009-03-01:
Kelly is living the life!
Posted by Anonymous on 2009-03-02:
Good post DB. I no longer work as a collector, but as a consumer it is nice to be informed of any changes to the FDCPA laws.

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