Government Report Recommends Significant Changes to FDCPA

The U.S. Government Accountability Office (GAO) Wednesday released to the public a report on credit card debt collection practices that made a number of direct recommendations for changes to the Fair Debt Collection Practices Act (FDCPA).

The report, “CREDIT CARDS: Fair Debt Collection Practices Act Could Better Reflect the Evolving Debt Collection Marketplace and Use of Technology,” concludes that the FDCPA is outdated and largely ineffective, especially when addressing issues of technology use.

GAO researchers interviewed many stakeholders in the accounts receivable management process for the report, including collection agencies, debt buyers, trade groups, consumer groups, credit card issuers, lawmakers, and economists. The report was requested by and addressed to the Democratic and Republican leaders of the Senate’s Subcommittee on Investigations within the Committee on Homeland Security and Governmental Affairs.

Although vastly broad in scope, the report concludes with three narrow recommendations for Congress to modify the FDCPA:

• Define the specific information that ARM firms must provide each other when exchanging accounts, specifically in portfolio sales.

• Change the language in the regulation to reflect new communication technology.

• Give the Federal Trade Commission rulemaking authority over the FDCPA.

The report provides detail on how a consumer’s request for verification can become burdensome for collection agencies and account owners that must follow a sometimes-complicated chain of title. The GAO recommended that Congress modify the FDCPA to ensure that the proper media is passed between parties in a debt sales transaction and that collection agencies have access to the media when the accounts are assigned.

Since the FDCPA was originally passed in 1977, it does not address technology that has been developed in the interim. The GAO used as examples specific technologies, mostly used in communication, that have caused problems with compliance for debt collection agencies: answering machines and voice mail, cell phones, Caller ID, fax and email, and predictive dialers.

Researchers were sympathetic to the seeming paradox collectors face in leaving messages on answering machines, specifically pointing to the Berg case as an example of how the FDCPA has failed to address these issues ("Legal Ruling Further Muddies Waters on Third-Party Disclosure vs. Mini-Miranda," Dec. 12, 2008).

The GAO also noted that if the FDCPA’s primary enforcer, the FTC, had rulemaking authority over these years, many of the problems would not exist today. The report states, “The legislative history of the act indicates that rulemaking authority was not provided to any agency because the relevant committee regarded the legislation as comprehensive and believed it would fully address all collection abuses.” The report argues that if an agency such as the FTC had rulemaking authority, changes to the FDCPA could be made more efficiently, rather than having to go through Congress.