Feb 15

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FTC Study on Debt Collection Buying Hints at Need for Greater Regulation

The Federal Trade Commission (FTC) issued a report on January 30, 2013 regarding the debt buying industry and the related debt collection efforts of the buyers. The FTC indicated that this is the first major empirical study of debt buying and related collections.

Debt buying and related collection practices are of concern. The FTC states:

“The FTC receives more consumer complaints about debt collectors, including debt buyers, than about any other single industry. Many of these complaints appear to have their origins in the quantity and quality of information that collectors have about debts. In its 2009 study, the Commission expressed concern that debt collectors, including debt buyers, may have insufficient or inaccurate information when they collect on debts, which may result in collectors seeking to recover from the wrong consumer or recover the wrong amount.”

The study showed that debt buyers often do not receive important information about the debts that they are purchasing, including (i) information that would allow one to fully evaluate the legitimacy of the debt (e.g., backup support for the obligation), and (ii) whether the debt is disputed. Little is paid for these debts, averaging just 4 cents for every dollar of the face value of what is allegedly owed. Some of the debts are older than the statute of limitations for collecting what would otherwise be owed.


About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2013/02/ftc-study-on-debt-collection-buying-hints-at-need-for-greater-regulation/

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