Debt Collector Complaints Continue to Rise

Once again in 2010, problems with debt collectors topped the list of consumer complaints submitted to the Federal Trade Commission (FTC), according to the FTC's report submitted to Congress today. The agency logged 140,036 complaints in 2010, up from 119,609 in 2009.

The top three categories of complaints about third-party collectors were:

• calling repeatedly or continuously;

• misrepresenting the character, amount, or status of the debt (including demanding a larger payment than is permitted by law); and

• failing to send consumers a statutorily required written notice about the debt and their rights.

The Fair Debt Collection Practices Act (FDCPA) prohibits these and other improper practices by third-party debt collectors but, as the complaints show, the law is frequently ignored.

These practices, odious though they are, pale in comparison to a new trend – the use of arrest warrants by debt collectors. Judges issued more than 5,000 arrest warrants during 2010 in nine counties recently studied by The Wall Street Journal.

More than a third of all states allow borrowers to be jailed if they can't or won't pay their debts. But a backlash is developing, as judges and law enforcement personnel say that jailing indebted consumers takes away valuable resources from handling truly criminal behavior. Some critics have also said that sloppy paperwork has resulted in consumers being arrested without any prior notice of the debt they are accused of owing.

The FTC began scrutinizing the practice last July but declined to say whether the inquiry has resulted in a format investigation, the Journal reported.

The largest publicly-traded debt collection agency, Encore Capital Group Inc., last year adopted a code of conduct for its employees, agents and attorneys, that states: “Under no circumstances should a firm cause a consumer to be taken into custody involuntarily.”