FTC urges changes to the Fair Debt Collection Practices Act
Recommendations include banning cell phone contact, texting
In 2008, the Federal Trade Commission received more than 78,000 complaints about third-party debt collectors -- more than any other industry under the FTC umbrella. As a result, the FTC announced in a Feb. 26 report presented to Congress that the Fair Debt Collection Practices Act should be updated to reflect changes in technology and to improve consumer protections.
The FTC said it has found "major problems in the flow of information within the collection system." For example, the recommendations for change include requiring collectors to have more accurate information on the amount of debt and the actual debtor, which could substantially improve the likelihood of collection -- and reduce the odds of bothering the wrong person with collection calls.
The FTC findings were the result of an October 2008 workshop at which representatives from consumer groups, the collections industry, academicia and various government agencies met to discuss the industry and how it impacts consumers and businesses.
The commission's recommended changes to the act include:
- Requiring collectors to issue "validation notices" to consumers disclosing the original creditor as well as a breakdown of the debt, including principal, fees and total interest. This notice would also inform consumers of their rights under the act.
- Requiring that collectors conduct "reasonable" investigations in response to a consumer's specific dispute.
In regards to changing technology, the FTC recommended the debt collection laws be modernized, including:
- Forbidding collectors from contacting consumers through their cell phones, including text messaging, without first receiving prior consent.
- Requiring collectors to obtain authorization from consumers before accessing their accounts through new payment technologies.
Throughout 2009, the FTC will hold regional roundtables with a variety of industry and consumer stakeholders to gather information to figure out how extensive the changes should be.
In addition, the FTC is asking Congress to give it permission to issue new Fair Debt Collection Practices Act rules in order that legal requirements keep pace with an ever-changing marketplace.
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