FTC to Collection Agencies/Attornies:
“You are either with us, or against us.”

Julie Brill, commissioner, minced no words when speaking to an assemblage of professional collectors and debt buyers at that industry’s association meeting – ACA (American Collectors Association) International in Las Vegas earlier this month.

“You can listen to me and listen to the Commission…or not.”

This came after her announcing a newly-released report from the FTC on this industry titled “Repairing a Broken System” in which abuses were enumerated. A number of specific recommendations to protect consumers from debt collection litigation included:

*States should adopt measures to ensure that consumers will defend in litigation.

Ex: The infamous process of “sewer service” by debt collection attorneys needs to be reigned in, along with limiting ARM lawyers to use continuance to extend trials.

*States should require collectors to include more information about the debt in their complaints.

Ex: debt collection lawsuit complaints should include the name of the original credit and last four digits of the original account number, the date of the default or charge off and amount due at that time, the name of the current owner of the debt…and more.

*States should take steps to make it less likely that consumers will unknowingly waive statue of limitations defenses available to them.

Ex: calls for a more clear and uniform statute of limitations for debt, as well as require ARM companies collecting on out-of-statute debt to clearly inform consumers that they cannot file suit on the debt…and more.

*Federal and state laws should be changed to prevent the freezing of a specified amount in a bank account into which a consumer has deposited funds that are exempt from garnishment.

Ex: at present, funds frozen in consumers’ accounts may likely include government payments such as Social Security (exempt from garnishment) and result in significant hardship for consumers. The desire is to limit the amount that banks can freeze in accounts receiving exempt funds.

*Debt collection arbitration should give consumers meaningful choice, eliminate the bias and appearance of bias in the arbitration system, and be conducted in a manner more likely to motivate the consumer to participate.

Ex: it is an open secret that Arbitration clauses included in most consumer contracts (read your credit card standardized legal boilerplate) requires a form of arbitration which in practice seems clearly skewed in favor of the creditor.  As a professional mediator, I can only believe that this is surely a violation of that industry’s practice and ethical construct.

The full text of the FTC’s report can be downloaded here. The report is from the Federal Trade Commission website.

As could be imagined, and reported in an article by Patrick Lunsford in an editorial at insideARM, a Kaulkin Ginsbert publication which serves as the industry sounding board and resource, Ms. Brill’s comments did not go over that well with many of the attendees.

In the aftermath of this article, some of the comments which arrived at the website ranged from heated to supportive.

“By HUGE majority, the most common FTC complaint is trying to collect money not owed. Many definitions to that phase. Wrong party,no longer enforceable by law, or creatively adding on fees not provided by contract, or statute. Doesn’t sound like the real issue is consumers that refuse to pay bills they know they owe and all about consumers that refuse to pay bills they know they ‘don’t’ owe.”

“Of course the FTC has some changes they want to make. If there were no changes to make; how could they justify their jobs. Pretty soon it’s going to be a crime to suggest that it is wrong not to pay back what you borrowed.”

“I am a consumer that ran into troubles – NOT OF MY OWN MAKING! (company went bankrupt owing me a ton of $$, including $30k worth of expenses on MY AmEx & Diners)…I have had to deal with the gamut in getting out of the mess. I can say that the DEBT BUYERS have consistently been the biggest ‘breakers of the law’…”

“The FTC just needs to target the violators and let the good agencies out there do their jobs. There are many honest agencies out there and the FTC needs to realize that. There is a ton of money that gets put back into the economy because of agencies and there is a bunch of money in the hands of Debtors that hide behind the laws and the low-life Attorneys.”

“Why do you think the credit industry is in shambles?? Because these regulations are in place to protect the consumers. Instead of giving these banks “bail out” money, they need to reform the FDCPA so it does protect the consumer, but at the same time, does not make collecting legit debts impossible.”

So, where do we go from here – both as issuers and users of credit?

From my experience, there is blame enough to go around – but the credit industry and those serving it (agencies, attorneys) deserve the majority of the scorn. From banks which – and this will sound incendiary – issue credit cards and charge exorbitant fees and interest charges to deliberately keep people in high-profit debt, to bottom-fishing low-life debt purchasers who use “legalized extortion” and worse to collect on their booty, this world is a sewer.

A good dose of “Roto-Rooter” is called for…and any reasonable and responsible member of the ARM industry will agree with me.

Stay tuned…this only gets better.

(To access the article quoted on this subject click here.)