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The U.S. Government Accounting Office is suggesting members of Congress consider changes to the Fair Debt Collection Practices Act that would reflect modern communication methods, provide more clarity for the collections and debt buying industry and improve consumer protections, according to a GAO report released yesterday.
"To help ensure that the debt collection system better protects consumers without unduly burdening the legitimate process of collection, Congress should consider modifying the Fair Debt Collection Practices Act to account for changes in the marketplace that have occurred in recent years," the report states.
The FDCPA, enacted in 1977, "hasn't aged well and is poorly enforced," Sen. Carl Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations, said of the report's findings. "The law was written before the advent of e-mail, cell phones and even fax machines."
The result, according to the report, is confusion on using these technologies in compliance with the law. Addressing technology "could benefit both industry and consumers, allowing the industry to more efficiently conduct its operations and consumers to receive information expeditiously and with appropriate protections," the report states.
Debt buying and the resale of accounts, the GAO says, has made it more difficult to verify debts, and changes to the FDCPA could help provide the debt collection industry with clear guidelines on what information they must provide to each other and to consumers, thus reducing cases where collectors seek payment from an incorrect party or for an incorrect amount.
The GAO also recommends the creation of a Consumer Financial Protection Agency with the authority to modernize and enforce consumer protections against unfair debt collection practices and monitor compliance.
"Consumers need a federal regulator that is looking out for their interests, rather than the interests of the financial industry," Levin said. "Even well-intentioned laws like the Fair Debt Collection Practices Act can erode over time and offer less and less protection to consumers."
Congress had asked the GAO to examine federal and state consumer protections and enforcement responsibilities related to credit card debt collection, the processes and practices involved in collecting and selling delinquent credit card debt, and any issues that might exist related to some of these processes and practices.
To develop the report, the GAO analyzed documents and interviewed representatives from six large credit card issuers, six third-party debt collection agencies, six debt buyers, two law firms, federal and state agencies, and attorneys and organizations representing consumers and collectors.
