Debt collectors and consumers who buy on credit have one thing in common: they should both pay attention to The Fair Debt Collection Act Annual Report. Released in March 2019, this yearly report contains information that can greatly affect both parties.
Before we get to those, let’s look at some of the facts in the report about the recent level of debt of US consumers, since any changes in how debt is collected affected these numbers. Quarter 4 of 2018 showed an increase in debt, the largest since 2008. The record amounts are attributed to credit cards as well as two types of loans: student loans and car loans. In dollars and cents, it comes to a whopping $13.54 trillion.
Actual debt may be even higher than that because of the way debt is calculated. The National Assistance Consumer Plan, which began a roll out in 2016, created a dip in the number of accounts classified as delinquent debts. Creditors responded to recommendations in the plan to withhold reporting debts that had no contract or agreement to pay, along with medical bills that were less than 180 days old.
Only time will tell how creditors respond to these recommendations in the long run, and how this will relate to the recommendation in the March 2019 Report. But the immediate result made the national debt levels look smaller than they actually are.
Despite this potential discrepancy, the contents of the Report are still worth scrutinizing. A major portion relates to the verification of a debt by a debt collector. Consumers have a right to challenge or dispute the validity of a debt within 30 days after being notified by a collector. This right is often referred to as the consumer’s 1692g rights, referencing 15 U.S. Code § 1692g.Validation of debts. Once that written dispute is received, the collector is to cease most of the collection effort until a verification of the debt is obtained by the collection agency.
This is where the process was found to have broken down, at least by many collection agencies. The Report finds fault with the communication flow where “debt collectors forwarded consumer debt validation requests to the relevant clients, who mailed responses directly to the consumers.” In other words, once a debt is turned over to a collection agency, all communication should flow directly between that agency and the consumer. This wasn’t happening with some collection agencies. To make matters worse, some collectors continued to contact clients during the period of validation of the debt.
This breakdown in validation procedures is manifested in the data regarding consumer complaints against collection agencies. In 2018, the Consumer Financial Protection Bureau received 81,5000 complaints regarding collection practices, with 40% of those complaints centering on debts not owed and 20% relating to the written notification process.
Clearly, consumers have been caught up in a communications loop gone wrong. The 2019 Report on debt collection appears to be having the desired effect, with agencies adjusting their debt verification and collection procedures accordingly. That’s a good thing for everyone involved.
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