Consumer Watchdog Report Magnifies State Debt Collection Practices

A new report from the National Consumer Law Center detailing state exemption laws for debt collectors paints a grim picture of how small statutes could have a big impact on consumer finance. And while the report has the debt collection industry talking – ACA International issued a scathing response – there’s a larger conversation to be had about the role debt collection may or may not play in “pushing families into poverty.”

According to the NCLC report, debt buyers purchased approximately 90 million consumer accounts with a face value of $143 billion in 2012; these accounts were bought for pennies on the dollar. However, debt buyers could only verify half of the debts disputed by consumers; ultimately, consumers disputed at least one million of these debts.

But the report makes a huge leap from the fact that consumers are disputing debt to the assertion that debt collectors are taking everything out from under them. Admittedly, just because a person goes into debt doesn’t mean a collector will always handle that person’s debt correctly. But it also doesn’t mean that collectors are lying in wait to rob consumers and thrust them into poverty.

The best way for the debt collection industry to respond to a report like this is to stay educated about state collection laws. Then, disputes are less likely to happen and consumer groups are more likely to some of the industry’s redeeming qualities (they do exist!).

A great, low-cost way to get started is with our new report Time is Running Out: Statute of Limitations for Debt Collection. We break down how all 50 states view oral, written, promissory and open-ended account debt. Learn how each state handles credit card debt; it’s not as cut and dry as you’d think! And if you’re thinking about getting into – or expanding within – local and state debt collection, our Local, State, and Federal Government Debt Collection Report gives you the top ten tools you need to succeed, including a comprehensive overview of market, its challenges, and its opportunities.

What do you think of the NCLC report? How can the debt collection industry best respond to this narrow depiction? Let us know what you think in the comments!