FTC Testifies before Senate Banking, Housing, and Urban Affairs Subcommittee on Debt Collection and the Fair Debt Collection Practices Act

The Federal Trade Commission told a U.S. Senate subcommittee that it continues to crack down on unlawful debt collection practices through an active program of vigorous law enforcement, education and public outreach, and research and policy initiatives.

Testifying on behalf of the FTC before the Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Financial Institutions and Consumer Protection, James Reilly Dolan, Acting Associate Director for the FTC’s Division of Financial Practices, said that challenging unlawful debt collection practices continues to be one of the FTC’s highest priorities.  Dolan noted that the FTC receives more complaints about debt collection than any other single industry, and that while lawful debt collection helps keep credit more readily available and affordable, unlawful debt collection victimizes consumers and places law-abiding collectors at an unfair competitive disadvantage.

The testimony highlighted some of the FTC’s recent work to ensure that debt collectors comply with the Fair Debt Collection Practices Act (“FDCPA”) and FTC Act.  It noted that since January 1, 2013, the FTC has brought 15 enforcement actions against debt collectors and obtained more than $56 million in judgments, and has engaged in a number of education, outreach, research, and policy initiatives.  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 enforcement actions in which the FTC has halted companies’ exceptionally egregious collection tactics.  In many of these cases, the FTC has sought and obtained strong preliminary relief, such as temporary restraining orders, asset freezes, and appointment of receivers.  For instance, the FTC has focused on shutting down so-called “phantom” debt collectors, which engage in wholesale fraud by attempting to collect on debts that either do not exist or are not owed to the phantom debt collectors.

The testimony also described some of the FTC’s research and policy initiatives concerning debt collection, including a July 2010 report that concluded that the system for resolving consumer debt 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.

In addition, the testimony noted the FTC’s collaboration with the Consumer Financial Protection Bureau (“CFPB”) on debt collection issues, and coordination on enforcement.  For example, in June 2013, the two agencies co-hosted a workshop about how consumer information is handled in the debt collection process.

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

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