FTC Meeting to Discuss Collection Litigation and Arbitration

A meeting next week to discuss legal matters important to the accounts receivable management industry has been in the works for months. But recent news may alter the course of the conversation.

The Federal Trade Commission will host a roundtable to discuss debt collection and arbitration practices Aug. 5 and 6 at the Thorne Auditorium, Northwestern School of Law, in Chicago.

The roundtable follows up on the FTC’s February 2009 report Collecting Consumer Debts: The Challenges of Change – A Workshop Report, which recommended that the debt collection regulatory system in the U.S. should be reformed and modernized ("FTC Proposes Significant Changes to FDCPA in Workshop Report," Feb. 27). The report also announced a series of regional roundtables to further discuss debt collection litigation and arbitration, next week’s meeting being the first.

The roundtable will include representatives from the collection industry, government officials, judicial system representatives, consumer advocates, academicians and other stakeholders.

On the first day, the roundtable will cover litigation topics including service of process, consumer default rates, time-barred debts, evidentiary requirements, and burdens in collection actions and post-judgment issues.

The second day will cover arbitration topics including the role of consumer choice, consumer arbitration codes and protocols, perceptions of bias, transparency of results and post-decision issues.

One of the biggest issues that needs to be addressed during the roundtable, according to Bob Markoff, president of the National Association of Retail Collection Attorneys (NARCA), Washington, D.C., is the subject of frivolous litigation.

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Too many consumer attorneys fight collections not on the basis of whether the consumer legally owes the debt, but on tiny technical issues, according to Markoff. “Most complaints don’t have to do with litigation issues. They’re really pushing the envelope on what the Fair Debt Collection Practices Act (FDCPA) covers. Many of the lawsuits that they file have nothing to do with the FDCPA. The claims about failure to do things is something that should be handled in state court. The FTC doesn’t regulate attorneys. States do.”

Another problem is that all of the penalties regarding frivolous lawsuits target collection attorneys, according to Markoff, so that encourages frivolous lawsuits on the consumer side.

Markoff added: “We don’t need more regulations, we need better enforcement of current rules.”

All of the litigation may be providing little benefit for consumers, added Valerie Hayes, ACA International’s vice president of legal, compliance and government affairs, who agrees that “hypertechnical” issues, such as not putting a license on a collection letter, should not be acceptable grounds for consumer lawsuits.

Among the issues ACA International hopes to bring up at the Chicago roundtable is the education of consumers regarding statute of limitations for collections, process servers and proper notice for consumers on arbitration issues. ACA was preparing formal comments that it planned to file with the FTC by the end of the week.

But as the ARM industry readies their voices to be heard, recent high-profile debt collection litigation and arbitration cases may not allow the industry’s concerns to be heard. The focus will likely shift to consumer protection.

Last week, two major actions were announced by separate states’ attorneys general. In Minnesota, a settlement was reached with the National Arbitration Forum over the organization’s alleged ties to banks and collection agencies. NAF agreed to immediately stop accepting cases involving consumer credit.

New York’s attorney general also announced the filing of a lawsuit against 37 law firms that could potentially overturn 100,000 consumer credit judgments against consumers in the state. The suit also targets two collection lawsuit process servers. The action was the latest in a series of suits aimed at the ARM industry in New York.

In addition to the FTC, NARCA and ACA, others on the roundtable will include representatives from Public Justice, the Consumers Union, the Michigan Poverty Law Program, the Michigan Creditors Bar Association, the University of Kansas School of Law, Public Citizen, the Center for Responsible Lending, the Illinois Credit Bar Association, the American Arbitration Association, the AARP Foundation, the National Arbitration Forum and DBA International.