Collection Agencies Deserve a Hefty Smack Down by Federal Government

COMMENTARY | Debt collectors are harassing people big time and the federal government is taking measures to penalize them. USA Today reported complaints against collection agencies to the Federal Trade Commission are up 17 percent. That’s no surprise really — every company is trying to maximize dollars, and collection agencies are not immune to that.

With the economy in the tanks, struggling companies are taking stronger measures against unpaid accounts. Gone are the days when a collection agency only called the deadbeats who refused to pay. Today, people can’t pay because they simply don’t have the money to do it. Add that to ever-aggressive collection tactics, and I’m surprised the complaints are so low.

FTC received 140,036 complaints in 2010 – up over 36,000 in a two year span. From government reports, collection agents are using ever-stronger tactics to squeeze payment from debtors, including illegal threats and intimidation tactics. Collectors rely on consumer ignorance by making threatening and frequent telephone calls, calling neighbors and friends and even suggesting that garnishment of wages is imminent.

It’s good to see the FTC is following up on these complaints and prosecuting the offenders – albeit will negligible fines that are unlikely to deter repeat occurrence in the future. That’s not to say that every collection agency is violating the law by calling a debtor. If someone owes a valid debt, they should establish some repayment plan that they can meet and reduce the debt and collectors should be a bit more understanding given the economic uncertainly that millions of families are struggling with right now.

When they are unreasonable, there are consumer remedies. A quick search of the internet will provide sample letters that stop collection action completely. The FTC has a formal complaint procedure when the collectors cross the line.

Martin Merzer with wrote a great article that debtors need to take to heart. Just because a collection agency claims you owe money doesn’t make it so. Require proof of the debt. Demand that proof be in writing and take no further calls until they prove it. That’s just smart financial planning.

Debtors should pay their bills and when collection efforts are required, they must be within the scope of the law. The FTC is right in enforcing sanctions against the offenders and, hopefully, will continue to aggressively protect American consumers while the economy recovers. More jobs create more money — and that pays down debts.

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