Consumers Union, the public policy and advocacy arm of Consumer Reports, called on federal regulators Wednesday to "protect vulnerable consumers from abusive debt collection practices."
The consumer group renewed its push for reforms as the Federal Trade Commission issued a report showing that debt buyers don't verify alleged debts in half of the cases studied.
"Too often, consumers are harassed about debts that have already been paid off or that they never owed in the first place," said Suzanne Martindale, staff attorney for Consumers Union. "Today's report shows that debt buyers often target consumers even though they can't prove that the debts are legitimate. It's time to enact some common sense reforms that protect consumers from these unfair debt collection practices."
The FTC studies more than 5,000 portfolios of consumer debt involving nearly 90 million consumers owing an estimated $143 billion. The study covered nine of the nation's largest debt buyers, which make up more than 75% of the industry.
To address some of the debt documentation issues cited in the report, Consumers Union is asking state and federal regulators to enact a number of reforms, including:
- End robo-signing and attempts to collect without proper documentation: Debt collectors should be required to document that they are attempting to collect from the right person, for the right amount, and on a debt that they can lawfully recover.
- Establish a sell by date for all debt: It should be illegal to sell or attempt to collect debt that is more than seven years old, which is too old to be reported on a credit report under the federal Fair Credit Reporting Act.
- Require debt collectors to provide more information to consumers: All debt collectors, including debt buyers, should be required to identify the name of the original creditor and to provide an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, and to provide detailed records about the debt to consumers within five days after the first notification.
- Require debt collectors to submit more detailed information when filing suit: Debt collectors should be required to submit basic information about the debt, including the name of the original creditor and an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, when they sue over a debt, so that the consumer can see if it is his or her debt, and in the right amount.
- Increase oversight to ensure consumers are properly notified of lawsuits: Courts should be required to provide supplemental notice of all filed debt collection lawsuits to debtors and default judgments should be prohibited if the notice is returned to the court as undeliverable.
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