FTC Testifies About Illegal Debt Collections

The Federal Trade Commission told a U.S. Senate subcommittee Tuesday that it is cracking down on illegal debt collection practices through a program of vigorous law enforcement, education and public outreach, and research and policy initiatives.

James Reilly Dolan, acting associate director for the FTC’s Division of Financial Practices, testified before the Senate Committee on Banking, Housing and Urban Affairs that challenging unlawful collection practices is one of the FTC’s top priorities. He noted that the FTC receives more complaints about collections than any other single industry, but did point out that lawful collections helps keep credit more readily available and affordable.

The testimony described enforcement actions in which the FTC has halted companies’ "exceptionally egregious" collection tactics. In many of these cases, the FTC has sought and obtained relief such as temporary restraining orders, asset freezes and appointment of receivers. For example, the FTC has focused on shutting down so-called “phantom” collectors, which engage in wholesale fraud by attempting to collect on debts that either do not exist or are not owed to the phantom collectors.

The testimony highlighted some of the FTC’s recent work to ensure that collectors comply with the Fair Debt Collection Practices Act (FDCPA) and FTC Act. It noted that since January 1, the FTC has brought 15 enforcement actions against collectors and obtained more than $56 million in judgments. The cases included a settlement filed last week with Expert Global Solutions Inc., commonly known as NCO, in which the defendants agreed to pay a $3.2 million civil penalty, the largest civil penalty the agency has obtained in a case alleging violations of the FDCPA.

The testimony also described some of the FTC’s research and policy initiatives concerning collections, including a July 2010 report that concluded that the system for resolving consumer collection disputes is broken, and a January 2013 report examining the results of the first empirical study of debt buyers. That report found there was room for improvement in the information debt buyers have when they contact consumers and try to collect on debts.