Debt Collection Protections At Risk, Consumer Group Warns

The Fair Debt Collection Practices Act contains strict safeguards for consumers, but the National Consumer Law Center (NCLC) is warning those protections are in danger of being weakened.

The group points to a proposed Federal Trade Commission (FTC) "statement of enforcement policy." The proposed policy could encourage more aggressive tactics by debt collectors, the group says.

"The plain language of the Fair Debt Collection Practices Act does not allow collectors to contact friends, neighbors or relatives except to obtain contact information for debtors," said Robert Hobbs, a lawyer and expert on debt collection issues for the NCLC. "This proposed rule could open the door for collectors to seek money by prodding and misleading grieving relatives and friends into thinking they have obligations that they don't."

Collecting from the dead

Collecting debts owed by deceased consumers has become an important field of specialization. At least five firms focus on such collections and employ hundreds of collectors, according to a recent report by the Minneapolis Star-Tribune.

Creditors who employ specialists to collect debts of the deceased include Nordstrom, Citigroup, Wells Fargo, JPMorgan Chase and Discover Financial Services, the newspaper found.

The Fair Debt Collection Practices Act prohibits abusive and deceptive practices by third-party debt collectors, including contacts with unobligated family members, friends and neighbors for any purpose except to seek contact information for those who owe debts.

Pressure on family members

But provisions of the proposed policy could undermine that prohibition, Hobbs warns, and provide a cover for debt collectors who persuade friends and family members to reach into their own pockets to pay debts allegedly owed by dead consumers.

"The FTC should strengthen protections for grieving families and friends, not open the door to debt collection efforts that often aim to exploit the vulnerability of the bereaved," Hobbs said.

Hobbs encouraged consumers, especially those who have been targeted by debt collectors seeking payments for obligations of just-deceased friends and relatives, to contact the FTC and express their support for stronger protections. Public comments can be submitted online until Nov. 8, 2010.