Complaints About Debt Collectors Soar in 2010: FTC

The Federal Trade Commission said Tuesday that complaints from consumers about debt collection jumped 18 percent in 2010. Third party debt collectors saw a nearly 25 percent increase in complaints against them.

In the FTC’s annual report on consumer complaints, identity theft was once again the most common complaint received by the agency, logging a total of 250,854. Debt collection came in second with a total of 144,159.

The FTC broke down the complaints against debt collectors into two categories: complaints received about creditor debt collection efforts and complaints against third party debt collectors. The first party category was virtually unchanged in 2010 with 32,825 complaints. The FTC calls the category “Creditor Debt Collection,” but does not differentiate complaints against original creditors and other owners of the accounts, such as debt buyers. Complaints against third party collectors soared 24.7 percent to 112,255 in the year.

But ARM industry leaders were quick to point out that the FTC’s complaints report paints an incomplete picture.

In a statement released late Tuesday, ACA International – a leading trade group for ARM professionals – noted that the FTC’s complaints report is a very important and worthy benchmark for identifying areas of improvement for collectors.

“However, as it relates to debt collection, an industry that attempts billions of consumer contacts each year of which only a small percentage results in complaints, the FTC’s data tells an incomplete story,” ACA interim CEO Ted Smith said in the statement.

The group pointed out that the complaints reported are comprised of both complaints and inquiries, “meaning there is no regard for whether the consumer is contacting the FTC with a question or a legitimate complaint.” There is also no verification process in place to determine if a complaint represents an actual violation of the Fair Debt Collection Practices Act (FDCPA).

More information on the FTC’s complaints data can be found in a special section published last year on insideARM.com, The Complaints Issue.

The FTC’s complaints report is compiled from a network of reporting groups that include the FTC itself – through its Web site, regular mail, or toll-free numbers – Better Business Bureau units, state enforcement groups like attorneys general, and private partners such as Publishers Clearing House and PrivacyStar.

Although not specifically enumerated in the report released Tuesday, the FTC said the most complaints against collectors were:

• Debt collector calls repeatedly or continuously;
• Falsely represents the amount or status of debt;
• Fails to send written notice of debt;
• Falsely threatens suit

The FTC said that complaints about credit card companies fell 26 percent in 2010, most likely due to new rules in restrictions passed recently by Congress and the Federal Reserve.