The Consumer Financial Protection Bureau (CFPB) report to Congress on the Fair Debt Collection Practices Act (FDCPA) detailed the seven actions taken by the Federal Trade Commission (FTC) against debt collectors under the FDCPA. What’s interesting to note is that none of the seven were known larger market participants, members of the group of roughly 175 collection agencies that will be actively supervised by the CFPB.
As explained in the FTC letter contained in the report, “to improve deterrence in recent years, the FTC has focused on bringing a greater number of cases and obtaining stronger monetary and injunctive remedies against debt collectors that violate the law. Over the past year, the FTC has brought or resolved seven debt collection cases, matching the highest number of debt collection cases that it has brought or resolved in any single year. In each of its six Section 13(b) cases involving debt collection, the FTC obtained preliminary or permanent injunctive relief. In many of these cases, the preliminary relief that was obtained included ex parte temporary restraining orders with asset freezes, immediate access to business premises, and appointment of receivers to run the debt collection business.”
These were all cases of egregious conduct by companies including lies, threats, and attempts to collect on debts not owed.
Of the seven cases, the following companies were targeted for deceptive, unfair, or abusive collector conduct:
- Forensic Case Management Services, Inc.
- Luebke Baker
- Goldman Schwartz
- AMG Services, Inc.
The remaining three companies were targeted for attempting to collect so-called “phantom debt” (often payday loans) that either doesn’t exist, or for which the entity attempting to collect has no right to do so:
- American Credit Crunchers
- Pro Credit Group, LLC
- Broadway Global Master, Inc.
I’ve been a publisher covering the debt collection industry since 2001. I’ve never heard of any of these companies.
Which brings me to this point: Also in 2012, the CFPB’s published its final rule establishing the first federal supervision program for the debt collection industry, bringing debt collectors with more than $10 million in annual receipts resulting from consumer debt collection within the scope of the CFPB’s supervisory authority.
Based on available data, the Bureau estimates that the rule covers approximately 175 debt collection firms—or 4 percent of debt collection firms—and that these firms account for 63 percent of annual receipts from the debt collection market.
What’s interesting to note is that while the Bureau estimates these 175 collection firms account for 63 percent of annual receipts from third-party debt collection, insideARM estimates that these same firms only account for 20-30 percent of annual debt collection-related complaints to the FTC.
To my knowledge, none of the seven firms listed above would have fallen within this group of 175 firms. So while rules governing debt collector conduct are important and should be enforced, the Bureau no doubt has limited resources. Over time, I imagine there may be some re-thinking of where the bulk of those resources are expended.