Debt Collectors on State and Local Consumer Protection Agencies? Radar

Complaints about credit and debt related matters to state and local consumer protection agencies rose last year, placing the consumer debt industry second only to the auto industry for complaints filed with state and local consumer protection agencies, according to a new report by three consumer protection groups.

The Consumer Federation of America conducted the survey in cooperation with the National Association of Consumer Agency Administrators and the North American Consumer Protection Investigators. The groups conduct the periodic survey to provide a national snapshot of the challenges facing state and local consumer protection agencies. The 2009 report, which looks at complaints filed during the 2009 calendar year, includes information from 33 state, county, and city agencies from 18 states.

The agencies investigate complaints ranging from false advertising on consumer products at local businesses and landlord-tenant issues to health products and services, according to the 2009 Consumer Complaint Survey Report. But complaints to state and local consumer groups involving credit and debt were among the fastest growing and led the industries to surpass complaints levied against home improvement and construction companies for shoddy service. The auto industry held onto the top ranking for complaints most frequency filed, the report said.

For complaints involving debt collectors, the report said consumers turned to state and local consumer protection agencies for help resolving illegal and abusive debt collection tactics. Consumers also sought help resolving disputes with debt collectors that affected their credit and claims being pursued by collectors that stemmed from debt no longer eligible for collections.  The report included an example of a consumer wrongly accused of owing debt, another pursued for debt that was too old to collect, and an example of an aggressive law firm accused of harassment and information sharing with people not responsible for the debts.

The report did not say how many complaints against debt collectors and the other industries were unwarranted. But the report found that despite state budget cuts last year that affected staff and resources at 71 percent of the agencies participating in the survey, state and local agencies said new laws are needed to protect consumers across all industries. Topping the list were calls for new laws to curb debt collection abuses.

When asked what law should be passed in 2010 to protect consumers, several agencies cited the need for stronger laws at the state level to regulate debt collectors and their practices, the report said. Consumer agencies were particularly concerned about debt collection businesses that pretend to be law firms to evade consumer protection laws. Some also want local consumer protection agencies to have the power to enforce state laws and write tickets for violations.

The Federal Trade Commission cited the report when it addressed the ARM industry at the ACA International Convention last month. But it should concern debt collection professionals for another reason.

State and local consumer protection agencies usually investigate and mediate individual complaints. Many have administrative, civil and/or criminal authority to stop abuse and recover money. Last year, more than 300,000 individual complaints across many industries were filed with the agencies, which obtained more than $110 million in restitution and savings for consumers.

Kaulkin Ginsberg Director Mark Russell said the industry should be concerned that local agencies are pushing for stricter regulation, even as the industry faces a new federal regulator with rulemaking authority through the Federal Reserve’s new Consumer Financial Protection Bureau.

“They want more power at the state and local level,” he said. “The industry is hoping this new entity (CFPB) will standardize the rules. But if state and local governments have their way, that’s a huge concern. If ARM companies have to continue to follow regulations at the local, state and federal level it will be more challenging to adhere to the all the regulations while doing their job.”  

ACA International Spokesman Mark Schiffman said the report doesn’t offer a lot of depth to support its findings.

“We appreciate learning about the findings in this report, but it leaves a lot of unanswered questions,” he said. “We share their desire for consumer protection and encourage consumers to visit Askdoctordebt.com for information about their rights in debt collection.”