Reining in the Repo Man: The Case for Increased Regulation of the Debt Collection Industry

Thirty years ago, Congress adopted the Fair Debt Collection Practices Act (FDCPA) to regulate third-party debt “collectors” hired by creditors to convince consumers to pay up on delinquent bills. Since the passage of the Act, the number of collectors has risen dramatically and the industry now pulls in $12 billion in annual revenues. Recent popular press articles conveying horror stories of consumers being abused at the hands of overzealous collectors compelled us to examine relevant data to determine if, and why, debt collectors have become more aggressive in recent years. This report finds a number of troubling consequences of the recent growth of the debt collection industry, including:

• The number of complaints to the Federal Trade Commission (FTC) regarding debt collection agencies has increased 560% since 1999, and the number of complaints to Better Business Bureaus regarding debt collectors has also increased roughly 560% since 1995;
• Despite receiving 305,570 complaints against third-party collectors in the past six years, the FTC has only initiated ten enforcement actions during that time and state attorneys general have collectively prosecuted only a handful of offenders;
• The economic squeeze on the American middle class caused by rising costs of living and stagnant wages makes Americans more vulnerable to the predations of lenders and collectors than in previous years.

In light of these findings, we recommend bolstering enforcement efforts and modernizing the FDCPA to better respond to debt collectors’ new abusive tactics. The federal government should:

• Adopt the FTC’s recommendations to close loopholes in the law that allow collectors to hide required legal notices and improper fees;
• Extend the FDCPA to regulate in-house debt collectors, who have increasingly adopted unscrupulous tactics;
• Implement strict pleading requirements to prevent collectors from using small claims courts to exploit vulnerable citizens;
• Increase punitive damage awards for FDCPA violations to be commensurate with the size of the industry and to compensate for thirty years worth of inflation.

Read the full report:

• Reining in the Repo Man: The Case for Increased Regulation of the Debt Collection Industry