Controversies
A debt buyer does not have the same incentive to maintain the customer relationship with a debtor as the original creditor, and some debt buyers may be unconcerned about negative publicity and complaints. Thus, there are reports that some debt buyers engage in abusive debt collection practices, which are illegal under the Fair Debt Collection Practices Act, including the following:
- Filing lawsuits with no documentation showing that the debt was ever purchased or assigned to the plaintiff
- Pursuing debts that are not actually owed by the person being targeted
- Attempting to collect, improperly suing, or threatening to sue people on debts that are past the applicable statute of limitations or were settled and closed via bankruptcy
- Reporting inaccurate creditor information to a credit bureau
- Impersonating law enforcement and threatening to have a person arrested, or threatening to directly garnish a person's wages, seize their property, etc.
- Failing to validate debt in writing when requested
- Continuing to call a person's place of employment when instructed not to
- Ignoring cease-and-desist notices to stop telephoning and communicate only via mail
- Verbally abusing, using obscene language, threatening and harassing consumers
While original creditors are often exempt from fair debt collection laws, courts and regulators have generally taken the position that debt buyers and any other third-party collection agency are covered by these laws. Thus, debt buyers who engage in abusive collections practices are subject to lawsuits under the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and other state and federal laws. They may also be subject to regulatory action by state attorneys general or the Federal Trade Commission, which in 2004 shut down Capital Acquisitions and Management Corporation, a debt buyer that allegedly engaged in extensive abusive collection practices.
To address many of the controversies surrounding debt buyers and to learn more about the business, the FTC in January 2010 asked nine of the largest debt purchasers in the country to submit detailed information about their businesses and the debt portfolios they have bought in the past.
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