Debt collectors generate more complaints to the FTC than any other industry. Although many debt collectors are careful to comply with consumer protection laws, others engage in illegal conduct. Some collectors harass and threaten consumers, demand larger payments than the law allows, refuse to verify disputed debts, and disclose debts to consumers’ employers, co-workers, family members, and friends. Debt collection abuses cause harms that financially vulnerable consumers can ill afford. Many consumers pay collectors money they do not owe and fall deeper into debt, while others suffer invasions of their privacy, job loss, and domestic instability.
The FTC enforces the Fair Debt Collection Practices Act (“FDCPA”), which prohibits deceptive, unfair, and abusive debt collection practices. Among other things, the FDCPA bars collectors from using obscene or profane language, threatening violence, calling consumers repeatedly or at unreasonable hours, misrepresenting a consumer’s legal rights, disclosing a consumer’s personal affairs to third parties, and obtaining information about a consumer through false pretenses. Because certain practices that violate the FDCPA also violate the FTC Act, the FTC also uses the FTC Act to halt unfair or deceptive debt collection practices.
The FTC has sued over 30 debt collection companies for violating the law, banning some from the business and making them pay steep financial penalties. The FTC also has recommended that Congress and the states modernize the debt collection laws to reflect changes in consumer debt, the collection industry, and technological developments that affect consumers and collectors alike. For example, a 2010 FTC report concluded that the process that many debt collectors use to sue alleged debtors or force them to arbitration is seriously flawed and causes substantial consumer harm. The report recommended that government, industry, and others adopt significant reforms.