The federal government is setting its sights on debt collection practices. Rising credit card delinquencies and charge-offs by lenders mean more borrowers are being hounded by companies that buy bad debt hoping to collect on it. But too often, collectors get bad information, leading to mistakes and unfair harassment, which has helped send complaints about abuses soaring -- from 79,000 in 2008 to more than 100,000 in 2009. “The debt collection industry is broken,” says Ira Rheingold, executive director and general counsel of the National Association of Consumer Advocates.
One big problem: Debt is often bought and sold multiple times, and along the way, key pieces of information go missing, according to a report from the Government Accountability Office. As a result, debt collectors go after the wrong borrower or the wrong amount. They try to collect debt that has been discharged in bankruptcy or already settled. Collectors only have to show the borrower the total amount of debt, which can confuse borrowers into paying debt they don’t legally owe.
To deal with the problem, the Federal Trade Commission is stepping up enforcement of debt collection cases. Officials are extracting bigger settlements and holding company mangers personally responsible for any wrongdoing. “That’s designed to increase deterrence,” says FTC official Thomas Pahl. The FTC also has formally requested that the nine largest debt collectors, which together buy and sell 75% of U.S. debt, turn over information by Feb. 25 on how they process claims. “We may make policy recommendations to Congress on things that are causing problems but may not currently be unlawful,” says Pahl.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The findings could spur lawmakers to get in on the act, requiring collectors to notify borrowers of the name of the original creditor and the breakdown of total debt when they come knocking on the door. They could also be required to keep more information on file and intact. In addition, expect updated rules on how modern technology is used. The industry welcomes rules that clear up confusion over when and how to contact customers, says Barbara Sinsley, who specializes in debt collection cases at Barron, Newburger & Sinsley PLLC. “Debt collectors want nothing more than bright lines.”
For weekly updates on topics to improve your business decisionmaking, click here.
-
Why Public Markets Don't Look Like They Used To -
Turning 65 in 2026? Here Is Exactly How to Sign Up for MedicareWhether you’re months away from your 65th birthday or plan to work past retirement age, here are the steps to secure your Medicare coverage and avoid costly mistakes.
-
A Free Tax Filing Option Has Disappeared for 2026: Here's What That Means for YouTax Filing Tax season officially opens on January 26. But you'll have one less way to submit your tax return for free. Here's what you need to know.
-
The Kiplinger Letter's 10 Forecasts for 2026The Kiplinger Letter Here are some of the biggest events and trends in economics, politics and tech that will shape the new year.
-
Disney’s Risky Acceptance of AI VideosThe Kiplinger Letter Disney will let fans run wild with AI-generated videos of its top characters. The move highlights the uneasy partnership between AI companies and Hollywood.
-
AI Appliances Aren’t Exciting Buyers…YetThe Kiplinger Letter Artificial intelligence is being embedded into all sorts of appliances. Now sellers need to get customers to care about AI-powered laundry.
-
What to Expect from the Global Economy in 2026The Kiplinger Letter Economic growth across the globe will be highly uneven, with some major economies accelerating while others hit the brakes.
-
The AI Boom Will Lift IT Spending Next YearThe Kiplinger Letter 2026 will be one of strongest years for the IT industry since the PC boom and early days of the Web in the mid-1990s.
-
Amid Mounting Uncertainty: Five Forecasts About AIThe Kiplinger Letter With the risk of overspending on AI data centers hotly debated, here are some forecasts about AI that we can make with some confidence.
-
Worried About an AI Bubble? Here’s What You Need to KnowThe Kiplinger Letter Though AI is a transformative technology, it’s worth paying attention to the rising economic and financial risks. Here’s some guidance to navigate AI’s future.
-
Will AI Videos Disrupt Social Media?The Kiplinger Letter With the introduction of OpenAI’s new AI social media app, Sora, the internet is about to be flooded with startling AI-generated videos.
