After more than a decade of eluding phone calls, a resident of Pittsburgh’s Brighton Heights neighborhood said his experience with a third-party collection agency hired to recoup his student-loan debt went from marginally annoying to borderline cyber stalking.
Even for loan scofflaws there are rules collection agencies must follow, and two government agencies are working to make that better known.
Clarifying that laws outlined in the Fair Debt Collections Practices Act of 1977 also apply to collection attempts made through digital media has been a priority for the Federal Trade Commission and Consumer Financial Protection Bureau, said Christopher Koegel, assistant director of the FTC’s Bureau of Consumer Protection’s financial practices division.
For example, full and honest disclosure of identity and the intent to collect a debt is mandatory for collection agencies.
It also prohibits contacting third parties without prior consent from the debtor or a court, unless they’re seeking location information for the debtor. The act bans disclosing debt obligations to third parties; contacting debtors after 8 p.m. and before 9 a.m.; directly contacting consumers who have attorneys handling the debt; making any false or misleading statements; using obscene or profane language; and using threats of violence to collect.
Individual debt collectors found in violation of the act could face fines of $1,000 per violation – money that goes directly to the debtor.
Last year, the federal agency initiated or resolved nine debt-collection cases, obtained injunctions against agencies or individuals in seven cases, and referred two cases to the Justice Department for civil penalties. One case – “United States v. Expert Global Solutions Inc.” – resulted in a $3.2 million civil penalty and a lifetime ban from the collections industry.
Those results may have set an FTC record, but they only scratched the surface of a larger problem.
A 2014 report says that last year, the commission received 204,464 debt-collection complaints, up from 202,616 in 2012. Thirty-eight percent involved collectors misrepresenting the type of debt, amount or status; 19.7 percent were failure to identify as a debt collector and 16.6 percent involved repeated calls to third parties.
The Consumer Financial Protection Bureau, which only began enforcing debt-collector complaints last July, has handled 30,300 debt-collection complaints in less than a year. Twenty-three percent of those surrounded collector’s communication tactics, 8 percent involved improper contact and 13 percent were concerns about disclosure and verification of debts.
The Brighton Heights man asked to keep his identity secret because his student-loan debt has ballooned from around $80,000 in 1998 to more than $270,000 following years without payment. In 2012, he hired an attorney and accountant to set up a payment plan. He believed the worst was over.
That is, until a picture taken in May with a celebrity, at a restaurant called Square Cafe, was posted to Facebook and shared more than 50 times within a friends list of more than 5,000 people.
Within days, a person who said he was looking for the man contacted Square Cafe and left a phone number that traced back to Salem, N.H.-based collection agency Windham Professionals Inc. A manager there, who would only identify herself as Samantha, said that company “handles personal business matters” but would not provide any additional comment.
“I don’t understand what my rights are. I didn’t know I had any,” the Brighton Heights man said.
If a debt collector researched Square Cafe by becoming his Facebook friend under false pretenses or by connecting with individuals on his friends list under a false pretense, the company would be in violation of disclosure laws and laws prohibiting contact with third parties associated with the debtor without prior consent, said Koegel.
In November, the Consumer Financial Protection Bureau kicked off the process of clarifying debt-collection rules, including proposed guidance to financial institutions warning that the debt-collection act also applies to digital forms of communication.
According to Koegel, the FTC has been spreading the message to third-party collectors since at least 2009.
“We have been emphasizing over the last five years that those rules apply to text messaging and social media,” Koegel said. “The mode of communication doesn’t matter.”
There’s little argument the rules have been announced. Whether they’re clear enough for third-party debt collectors to understand is another matter, said Mark Schiffman, vice president of public affairs for the Minneapolis-based Association of Credit and Collection Professionals International.
Schiffman argues that laws limiting disclosure of debt obligations keeps collectors from leaving voice messages, because someone other than the debtor may hear the content. And laws against “excessive” phone calls do not define how many calls can be made within a given period of time.
Schiffman said collectors use a method called “skip tracing” to build profiles on debtors using publicly available information found online, including public information displayed on social-media sites. Although he said bad actors who take skip tracing too far and violate the law deserve punishment, he also said a little clarity surrounding what can and can’t be done would go a long way for collectors and consumers.
“In terms of the (Fair Debt Collections Practices Act), there’s a lot of gray area. Interpreting it is difficult and usually depends on which lawyer in which state is making the argument. It’s a large part of what ails debt-collection efforts,” he said.
If a lack of clarity is a hurdle for collectors, a lack of awareness that the federal debt-collection act even exists is a mountainous obstacle for consumers, said Koegel.
He reminded consumers that they can check credit reports at AnnualCreditReport.com to ensure the debt being reported is the same as what’s being collected. And he advised them to learn their rights, and to directly contact the Federal Trade Commission, the Consumer Financial Protection Bureau or the state Attorney General’s office to report collection-agency violations as soon as they occur.
For consumers worried that filing a report would send collection agencies to their doorstep, Koegel noted all reports are confidential and investigations are conducted with solely the consumer’s rights in mind.
“Regardless of how much a debtor owes, it doesn’t mean they have to sacrifice their right to basic human dignity,” he said.