It’s been a bad week for the debt collection industry. The widespread practice of using ”robo-signed” affidavits in debt collection lawsuits is getting increased scrutiny in the courts, according to the American Banker.
But that’s not the half of it – now the federal government is intensifying its focus on the most infamous players in the industry – the debt buyers.
These are the folks who buy portfolios of consumer debts from original creditors for pennies on the dollar and then try to collect on them, often by filing cookie-cutter lawsuits in bulk. It’s been a booming business in recent years for the debt buyers, but an increasing burden on consumers and the courts.
Enter the Federal Trade Commission, which just announced that it has reached a $2.5 million settlement with Asset Acceptance, one of the biggest debt buyer firms in the country. The FTC alleges that Asset Acceptance has been suing consumers on debts that are too old to be pursued in court – often called “time-barred” debts - and that the firm has engaged in debt collection efforts even though the information they have about the debts is often unreliable, outdated or just plain wrong. These practices, according to the FTC, are “deceptive” and therefore illegal.
This FTC action may be just the tip of the iceberg. Since the FTC doesn’t tell states how to run their courts, it has asked states to pass their own laws tightening up the requirements for filing debt collection lawsuits. In fact, the California Senate passed a bill just yesterday that aims to rein in the same practices that the FTC has targeted in the settlement.
For more information on consumer rights and ”time-barred” debts, check out the FTC’s informational website.
For more information on debt collection issues, visit our website.