FTC Proposes Significant Changes to FDCPA in Workshop Report
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.
<!–PAGEBREAK–>
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.”
Vast majority of our portfolio only carry cell phones. During this current economic depression, people cannot afford the luxury of having a landline and a cell phone. If you had to choose one, I’d go with the cell as well. That particular piece of legislation needs to be looked at again.
Since the primary means of communication is fast becoming cell phones this is the only way to contact many consumers.
I hope they clarify the FDCPA so that email and texting, for example, are able to be utilized more often in the collection process. It is important they don’t prohibit cell phone contact because not many people, especially young even have a land line. These methods are the preferred way for most people these days to communication, time for agencies to be able to utilize this technology to its fullest potential. It would also probably cut down on complaints to the FTC as well. The old model of sending letters and making calls is less effective, more expensive and causes more complaints.
I really hope they don’t tie the hands of agencies any more. It is already difficult to squeeze profit due to increase regulation and rate pressures from Clients. It is time to allow agencies to communicate with modern methods to increase contacts and reduce costs. However, I do realize and doubt that the FTC is concerned about helping our industry.
I am not sure that the FTC is looking at the cell phone issue the right way. Almost everybody today uses a cell phone as their primary piece of communication. Many people we talk to today DON’T even have a land line anymore. I cancelled my land line because it wasn’t cost affective to have both. I can always be reached on my cell and that is how most consumers think as well. I would have thought the FTC would have gone in the other direction with this piece of legislation. I hope they reconsider their position as this will change the collections industry completely.
Did I see “statutory damages should be increased due to inflation” You have to be kidding!
Don’t pay your bills-get some agency calls then sue the agency and get a 4% increase because of inflation..Great !!!!
Yet another attempt by the liberals to destroy the Collection Industry. One reason we are in this economic mess in the first place is because big government feels the need to regulate the Credit Industry to a point where being profitable isn’t a priority. Want to know what it looks like when the government regulates business of an entire state? Just look at California, one of the worlds largest economies. A state in the US on the verdge of BK??? Look at the post office. They cant even get that right, and people actually want them in charge of our banking system. Just wait until Barrack gets a hold of his own bank. The National Banking System is just around the corner. You voted for him America!
Transalation……….Prepare for the onslaught of frivolous, illegitimate lawsuits brought by every Tom, Dick and Henrietta looking for that angle to get out of their legitimate debt in favor of getting a check for $3600.00. There should be no modifications to “the Act” unless procedures are put in place to police and penalize those that bring actions for no valid reason. If they consumer is found to have brought a frivolous action, the agency should be able to collect the $3600.00 for each accusation brought and proved to be false.
Although, I agree that there should be some changes made to FDCPA, especially with repsect to new methods to communicate. I am not in favor or more government regulators. For the most part, our industry does a very good job of “playing by the rules”. Civil suits will deter anything less.
If you follow the FDCPA to the letter, someone can still sue you. Most ARM lawsuits are unfounded but the agency pays out of court because it is less expensive than fighting for their own rights to collect a legit debt. Maybe all of these laws come about because a lot of the members of Congress are debtors themselves. Go read the online article “Capital Hill Blue”
I’m not completely against providing the consumer with more of their rights, however, if we tell them how/what they can do to have a collector stop calling them, they should also be informed of the accelarated collection process and/or reprocussions that will happen. They can not take the ability to call cell phones away. We all know why…
That cell phone provision is a killer! People are dropping their landlines in droves, leaving the cell phone as the only way to contact them. Twenty years ago, this might have made sense, as cell phones were very expensive and per minute charges were outrageous – but now, most people are on unlimited plans or buy a package of hundreds of minutes for a very reasonable price. There is nothing sacred about the cell phone.
Don’t forget congress ran America the last eight years .Its you liberals that got us in this mess not Bush. Now that its all Democratic its totally in their court.
“Liberal” anonymous, you are completely clueless about what caused the meltdown and all of its causes. Yes, Bush acted like a liberal in many ways, no conservative spending values at all, he is not without fault. But it wasn’t conservative principles that put us where we are today, its that fact that we have gotten away from them. Start with the housing industry, got back and search for the senate hearings on Fannie and Freddie and see what your friendly libs were saying back on 05 and 06. One month in office Barack has already destroyed our future to the tune of $25K PER TAXPAYER, just for this year’s budget! Incredible. Then in the name of “honesty” puts the Iraq spending on the budget. Great idea, but how about being even more honest and put the cost of Social Security, Medicare and Medicaid on the budget as well. He doesn’t want to be that honest, only take digs at W.
The problem with you libs is that your socialist. The problem with Socialism is that eventually you run out of other people’s money. We are quickly approaching that point and it’s only been 1 month.
I agree completely with paybill.
look how many liberals outright attacked conservatives and regulators for even suggesting that fannie and freddie were headed for trouble. Harry Reid….Barney “marblemouth” Frank and numerous others actually said the regulators and auditors were wrong. “if it aint broke, dont fix it” was a comment the libs actually used.
Barack Obama was on the senate permanent subcommittee on investigations which conducted an under the radar investigation recently (prior to the election)of why debt collection complaints are rising at the FTC???huh. sounds obvious right? anyhow, he is familiar with debt collection and would be a hero to his gimme gimme voter base. bigger settlements-more onerous requirements on the people debtors essentially stole from to get them to pay back what they took.
This is a mess, and the land of gimmes and political correctness combined with the voter on my team can do no wrong policies is going to land any capitalist in a lot of trouble and burden. I heard amtrak was hiring.
The prohibition of calling cell phones can only be attributed to folks that are well behind the curve when it comes to technology. Of course Joe Biden (who claims to be tech savvy) demonstrated his ignorance just this week and he’s our V.P. What should/could we expect from other bureaucrats? We can live with the other proposed changes but eliminating cell phones is unacceptable.
This discussion on how the economy got here is endless and pointless to the common concern we have– debt collection. Adjustment for inflation? An obvious change that we would be demanding were the roles reversed– not worth fighting, just something we have to accommodate. Prohibiting contact by cell phone is ridiculous for all the reasons that have been discussed above and can’t possibly make it in the final version of these changes unless we are all incompetent at using the resources at our disposal to point out the folly of the idea. As primarily a debt seller, the burden will be on my group’s side to provide the information necessary to the buyers to document validity, when necessary– and eminently reasonable. Our industry largely does things the right way and will continue to do so, making the necessary corrections as the pendulum swings left and swings right. Finger-pointing and name-calling serves none of us well.
THe FDCPA needs to be amended to exclude landlord-tenant complaints from the 30 day rule, and generally make exception for state law rules governing court procedures concerning 3d party contacts via subpoenas, summonses, depositions, and other court procedures. Right now, certain federal districts are hammering attorneys for exercising what used to be obedience to state and local law (and even federal law)procedure authorizing actions which the FDCPA facially prohibits (which surely could not have been intended). These anomalies continue to exist without comment from the FTC or any other regulators who really have no idea how litigation works.
We, as debt collectors, are all in the same boat. It’s no secret that there is an obvious bias against the collection industry. What has always infuriated me about hearing of proposed changes to the FDCPA is that lawmakers are trying to punish collectors for doing their jobs, saying that consumers are being abused, etc. However, in turn, lawmakers are impressing upon debtors that it’s OK to rack up debts, move and provide no address, ignore letters from creditors and agencies, refuse to answer the phone, make promises to pay that they have no intention to keep (can’t we get sued for claiming to do something that we don’t intend to do?) Why is it OK for debtors to do that when collectors violate the law? It’s thoroughly disgusting to see that lawmakers want to pile on more regulations, burdening the collection industry even further, while letting debtors skate. We are no longer dealing with unsophisticated consumers. They are smarter than you may think. Giving them more loopholes in which to escape a debt with no penalty does nothing to strengthen the moral fabric of this country.
We, as debt collectors, are all in the same boat. It’s no secret that there is an obvious bias against the collection industry. What has always infuriated me about hearing of proposed changes to the FDCPA is that lawmakers are trying to punish collectors for doing their jobs, saying that consumers are being abused, etc. However, in turn, lawmakers are impressing upon debtors that it’s OK to rack up debts, move and provide no address, ignore letters from creditors and agencies, refuse to answer the phone, make promises to pay that they have no intention to keep (can’t we get sued for claiming to do something that we don’t intend to do?) Why is it OK for debtors to do that when collectors violate the law? It’s thoroughly disgusting to see that lawmakers want to pile on more regulations, burdening the collection industry even further, while letting debtors skate. We are no longer dealing with unsophisticated consumers. They are smarter than you may think. Giving them more loopholes in which to escape a debt with no penalty does nothing to strengthen the moral fabric of this country.
Interesting tone of the responses. Mostly complaining. Everyone is in the same boat. They changed the rules, ok get more creative. In many cases we are paid on contigent basis. That means you don’t call you don’t eat. Study the rules, then form your game plan and get after them.
i am a debtor and i have to agree that banning the cell phone really makes no sense.the bill collector must somehow make contact with the debtor.i thionk the fdcpa law says a debtor can request not to be contacted at all.or can always have the collector contact the debtor thru other means.
I would like to see a study of how many people are using cell phones as their only means of communication and how many right party contacts are on cell phones. I already know, it is staggering, because few people have both. We produce a service to the economy in general and like a person previously suggested, that stopping cell phones calls to people who contractualy have for whatever reason have not abided by their agreement to repay their obligation is looking short sighted. If they take the cell phones off the table, the burden will be on the financial institutions that are now in so much trouble because we give back to the economy, not take away.
There are pros and cons to everything and being on a side of a debt collector and a debtor. There will have to be a compromise. Cell phones are not the way to go, it is to easy to prove contacts from collectors by cell phones then it is from landlines, it is to easy to save those text messages. The answer lies with a bad economy, giving credit to whomever, whenever and then expecting a collection agency to perform miracles. The lawsuits are due to a high pressured job, placed on a collector to push push rather than neg or ppa. Settlements are great, but if the pressure releases from the collectors, then the collectors will think more clearly on creativity and more money will be collected. The requirements of clients are an issue as well. No matter how many regulations you put on this industry, the lawsuits will always be there. You have some debtors that deserve to file suit from collectors that just didn’t care what they said or did and then you have those professional debtors that live to file a suit and sit by the phone.
I agree that consumers should hve their rights, but at the same time, I think that it has come to a point that Debt collectors/agency’s should be able to carry some rights as well.
This problem is more than an overnight fix, and the one to fix it, will have to be the one that has experience as being a debtor and being a collector/or owner in the industry. The government has never be capable of fixing a problem that they really have no experience in. Ex: Would you just ask anyone to find the cure for Cancer or a scientist that has experience in what might work..??!!
I can only hope that the FTC will see the light with regard to the cell phone issue. If they can’t — then it won’t be long before small to medium size agencies are out of business due to meritless lawsuits, and/or or agency owners just giving up in frustration. Collection agencies serve a VITAL roll in the revenue management cycle. We help keep costs down for all Americans and we help to keep businesses in business. It is as though the government doesn’t see the value we serve. The internet is teaching consumers in large volume how to avoid paying debts and now they are learning how to threaten lawsuits (again meritless) to get agencies to remove derrogitory debts from their credit reports. Collection rates are down. we are lucky to hit 10% these days. that says 10 out 100 people are paying past due receivables. Baseless lawsuits have got to cease. We need a mediation or arbitration court to address FDCPA issues, without cost to the agency. Many agencies are willing to pay a settle, when they did NOTHING wrong – just to avoid triple the expense to any attorney. We should be allowed to counter sue !!! and hold the consumer accountable for our legal fees. This entire industry is INSANE – i just don’t understand why the value we bring to keeping goods and services down for all consumers and small businesses in business – goes unrecognized. It really boils down to a fundamental difference in political philosophies — conservative vs liberal and their approach to find a viable solution. I stand on the side of conservatism and Capitalism. Rush Rules :-)
Standard, non-sensical government intrustion at work. The FTC says: ?The FTC believes that debt collectors generally should be allowed to use all communication technologies, including new and emerging technologies, to contact consumers.? and then turns right around and denies access to debtors via cell phones “unless they have obtained prior express consent” (like THATS ever going to happen!. The non-productive clumsiness of American bureaucracy continues.