FTC RELEASES ANNUAL REPORT ON ADMINISTRATIVE AND ENFORCEMENT ACTION TAKEN UNDER THE FDCPA IN 2006
The Federal Trade Commission recently released its annual report to Congress summarizing the administrative and enforcement action taken under the federal Fair Debt Collection Practices Act in 2006. Federal Trade Commission Annual Report 2007: Fair Debt Collection Practices Act at 1. The Report discusses a number of issues, and provides: (i) an overview of the types of consumer complaints the Commission received in 2006; (ii) a summary of the Commission’s debt collection enforcement actions; and (iii) a summary of the Commission’s consumer and industry education initiatives. Id. at 2. The Report states that the Commission staff intends to hold a workshop in the fall of 2007 to examine the debt collection industry and a number of current issues.
With respect to consumer complaints, the Commission reported that it received a 3.8% increase in the number of complaints concerning actions by third-party debt collectors. Id. at 2 n.4. The number of these complaints was higher than the number of consumer complaints filed against any other specific industry. Id. at 3. The third-party collector complaints represented 19.9% of all complaints the Commission received in 2006. Id. According to the Commission, the majority of complaints involved the following conduct:
- Demanding a larger payment than is permitted by law;
- Harassing the alleged debtor or others;
- Threatening dire consequences if a consumer fails to pay;
- Impermissibly calling consumers at their place of employment;
- Revealing alleged debts to third parties;
- Failing to send required consumer notices, such as validation of debt notices;
- Failing to verify disputed debts; and
- Continuing to contact consumers after receiving “cease communication” notices.
Id. at 4-7.
The Commission noted that the complaints received about the actions of in-house creditors’ collectors decreased somewhat. Id. at 3 n.7. The Report notes that although creditors’ unfair or deceptive practices are not covered by the FDCPA, they are prohibited by Section 5 of the FTC Act. Id. at 7. The Commission has sued creditors in the past, and will continue to do so in the future as appropriate. Id.
With respect to enforcement, the Commission filed suit against one collection agency, Rawlins & Rivera, Inc., and reached settlements in its cases against two others, Whitewing Financial Group, Inc. and Capital Acquisition & Management Company. Id. at 8.
- Margaret Stolar and Charles Gall
NYC WARNS DEBT BUYERS ABOUT LICENSING
The New York City Department of Consumer Affairs released a statement warning debt buyers that they must be licensed when collecting from New York City residents. The statement indicated that as part of its aggressive campaign to tackle growing complaints, the Department would pursue those operating illegally to ensure consumer protection.
- Margaret Stolar and Charles Gall
FTC SUPPORTS NACHA’S PROPOSALS TO PREVENT UNAUTHORIZED TRANSACTIONS
The staff of the Bureau of Consumer Protection of the Federal Trade Commission recently issued a comment supporting NACHA’s proposal to strengthen the unauthorized transaction risk management procedures within its Rules, as described in The Network Enforcement Proposal: A Component of the Comprehensive Risk Management Strategy for the ACH Network (the “Network Enforcement Rule proposal”). The Network Enforcement Rule proposal would combat unauthorized transactions by creating a new structure for enforcement and fines. For example, the Network Enforcement Rule would (i) increase the fine levels in NACHA’s National System of Fines to up to $500,000 per month, (ii) permit NACHA’s Rules Enforcement Panel to suspend financial institutions’ privileges of originating ACH payments and (iii) require financial institutions that are suspected of creating the greatest risk to comply with new reporting requirements, and tie those requirements into the National System of Fines. The Network Enforcement Rule proposal also would combat unauthorized transactions by authorizing the NACHA Board to set a threshold for excessive unauthorized returns for all ACH transaction types. The Commission indicated that these self-regulatory measures will be an important complement to the Commission’s law enforcement actions against fraudulent operators who reach consumers through telemarketing and use the ACH network to debit their victims’ bank accounts.
- Mike Tomkies and Charles Gall