On March 5, 2014, the FTC announced that it has stepped up its enforcement efforts of the Fair Debt Collection Practices Act.
According to FTC’s press release, while its debt collection efforts in the past have focused on research and consumer education, the Commission has focused on law enforcement efforts in recent years, especially after the financial crisis.
In 2013, the FTC brought or resolved a total of nine debt collection cases. The FTC brought forth its first enforcement action against text-message debt collection, fined the largest third-party debt collection agency in the world the highest debt collection civil penalty, and obtained temporary restraining orders halting the unlawful conduct and freezing the assets of some defendants while the court case proceeded. For the most egregious violators, the FTC obtained orders which banned the responsible parties permanently from debt collection.
The most common violations cited by the FTC include:
- Failing to notify consumers of their right to dispute and obtain verification of their debts.
- Misleading customers into believing that their debt will cause them to be arrested, have their wages garnished, have the custody over their children stripped, or imprisoned for lengthy periods.
- Continuing debt collection activities without verifying the debt.
- Masquerading as entities other than debt-collection agencies, such as lawyers or law enforcement officers.
- Disclosing the status of customers’ debt to third parties, including family members, neighbors, or employers.
- Making phone calls early in the morning or late in the night, with the intent to harass customers.
The FTC also filed three amicus briefs in the last year. In its brief for the Seventh Circuit, the FTC argued that a payday lender’s mandatory pre-dispute arbitration clauses may be unconscionable, in part because they require alleged debtors to arbitrate in a remote tribal court, effectively pressuring those consumers to abandon their legal claims or defenses. The FTC joined the Consumer Financial Protection Bureau in filing two other amicus briefs. The first, submitted to the Seventh Circuit, argued that a debt collector violates the law whenever its communications tend to deceive or mislead consumers into believing that a time-barred debt could be the subject of a collection suit. The second, submitted to the Second Circuit, argued that debt collectors whose process servers failed to notify consumers that they were being sued violate the Fair Debt Collection Practices Act, which broadly prohibits deceptive and unfair collection practices in any form.