Consumers Get New Protections from Illegal Debt Collections

While 2020 didn’t have many high points, there’s at least one thing for consumers to celebrate – a new initiative aimed at protecting consumers from fraudulent and harassing debt collectors.

The Federal Trade Commission announced Operation Corrupt Collector (OCC), in September, a crackdown involving three other federal agencies and partners from 16 states. It included more than 50 enforcement actions against debt collectors accused of using threatening or abusive language or trying to fraudulently collect debts a consumer does not actually owe, known as “phantom debts.”

It’s quite common for debt collectors to try to collect old debts that have already been written off. They buy the debts for pennies on the dollar, then try to collect the full amount. In some cases, debt collectors don’t have the legal right to collect the debt despite their claims.

Debt collectors also frequently try to intimidate families into paying the debts of a deceased family member. While the deceased person’s estate is responsible for some debts, individual families members are not, unless they co-signed a note.

This infographic from the FTC provides more detailed advice for consumers:

In September, the FTC said it had received more than 85,000 reports from consumers about debt collection so far in 2020, with nearly 45% related to debts that consumers didn’t owe or abusive and threatening practices.

FDCPA

Consumers’ first line of defense against unethical debt collectors is the Fair Debt Collection Practices Act (FDCPA), a federal law enacted in 1978 that limits the behavior and actions of third-party debt collectors.

The law restricts when and how collectors can contact debtors, as well as the time of day and number of times contact can be made. If the FDCPA is violated, a suit may be brought within one year against the debt collection company as well as the individual debt collector for damages and attorney fees.

The FDCPA does not protect consumers from those who are attempting to collect a personal debt, only from the actions of paid debt collectors. Credit card debt, medical bills, student loans, mortgages, and other household debt are covered by the law.