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Consumers being hounded for debts they don't owe

As posted on March 20, 2014 on www.consumeraffairs.com

By Truman Lewis

Nobody likes debt collectors but it's even more annoying when the debt in question is bogus. Yet, it's a common practice and the Consumer Financial Protection Bureau (CFPB) says it often involves aggressive communication tactics and threats of illegal actions.

The CFPB today issued a report on the more than 30,000 consumer complaints it has received about the debt collection market. 

“Consumers should never be hounded about debts they do not owe,” said CFPB Director Richard Cordray. “We will not tolerate companies harassing consumers or threatening illegal actions in the debt collection market. We will continue to work hard to ensure that consumers are treated with dignity and fairness.”

Debt collection is a multi-billion dollar industry. It is estimated that there are more than 4,500 debt collection firms nationwide. Banks and other original creditors may collect their own debts or hire third-party debt collectors. Original creditors and other debt owners also may sell their debts to debt buyers. Debt buyers may sell the debt, collect the debt themselves, or hire third-party debt collectors to do so.

Consumer complaints

The Bureau began accepting debt collection complaints in July 2013. These complaints quickly became the largest source of complaints each month. The Bureau received 30,300 debt collection complaints between July and December 2013. Companies have already responded to about 82 percent of the complaints the Bureau has sent to them for a response in that time frame. The top three complaints were about:

  • Collectors hounding consumers about a debt they do not owe: More than one-third of the complaints the CFPB handled were about a debt collector continually attempting to collect a debt that the consumer does not believe is owed. 
  • Aggressive communication tactics: Nearly a quarter of the complaints received by the Bureau were about debt collectors using inappropriate communication tactics. 
  • Taking or threatening an illegal action: About 14 percent of consumers report that a company is taking or threatening an illegal action. Most of these complaints are about threats to arrest or jail consumers if they do not pay.

$1,400 each

Approximately 30 million Americans had, on average, $1,400 of debt subject to collection in 2013. The main law that governs the industry and protects consumers is the 1977 Fair Debt Collection Practices Act (FDCPA).

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) revised the FDCPA, making the Bureau the first agency with the power to issue substantive rules under the statute. Today’s annual report to Congress highlights the Bureau’s efforts to carry out the FDCPA.

What to do

The Bureau has issued sample letters consumers can use in dealing with debt collectors. These letters may help consumers obtain valuable information about claims being made against them or may help consumers protect themselves from inappropriate or unwanted collection activities. And the Bureau’s interactive online tool,

The sample letters and more information about debt collection are available at Ask CFPB.