Federal Trade Commission (FTC)
July 1, 2010
The Federal Trade Commission presents recommendations, which they gathered through public roundtables the year prior. These roundtables brought together representatives from the debt collection industry, consumer advocates, judges, attorneys, and others.
In this article, the Federal Trade Commission conducted a series of roundtables on debt collection litigation.
Highlights from the report include:
“Based on the record from the roundtables (including the associated public comments) and its experience in debt collection matters, the Commission’s principal findings, conclusions, and recommendations with respect to debt collection litigation are:
States should consider adopting measures to make it more likely that consumers will defend in litigation. Very few consumers defend or otherwise participate in debt collection litigation, resulting in courts entering default judgment against them. States should take steps to ensure that: (1) consumers receive adequate notice when actions have been commenced; and (2) the costs to consumers of participating in such actions are not prohibitively high.
States should require collectors to include more information about the debt in their complaints. Complaints often do not contain sufficient information to allow consumers in their answers to admit or deny the allegations and assert affirmative defenses. To assist them in doing so, states should consider requiring that debt collection complaints include: (1) the name of the original creditor and the last four digits of the original account number; (2) the date of default or charge-off and the amount due at that time; (3) the name of the current owner of the debt; (4) the total amount currently owed on the debt; (5) the total amount owed broken down by principal, interest, and fees; and (6) the relevant terms of the underlying credit contract, if the contract itself is not attached to the complaint.
- States should take steps to make it less likely that collectors will sue on timebarred debt and that consumers will unknowingly waive statute of limitations defenses available to them.
In circumstances where it is difficult to determine the correct statute of limitations, it would be advantageous if states developed more clear and uniform statutes of limitations.
- Consumers do not understand that in many states a statute of limitations constitutes an affirmative defense which may preclude collectors from successfully suing to collect, so they rarely assert this affirmative defense. These states should assign to collectors the burden of proving that debts are not time-barred and require that they include the date of default and the statute of limitations in their complaints.
- Consumers are not aware that collectors cannot lawfully sue to recover on timebarred debt. To prevent deception, collectors who seek to collect debt they know or should know is time-barred should disclose that they cannot lawfully sue the consumers. Consumers likewise do not know that in many states making a partial payment on a time-barred debt revives the entire debt for a new statute of limitations period. Collectors in these states should disclose to consumers that making a payment will revive such debt.
Federal and state laws should be changed to prevent the freezing of a specified amount in a bank account into which a consumer has deposited funds that are exempt from garnishment. When banks freeze the accounts of consumers who receive government payments such as Social Security (which are exempt from garnishment), it may result in significant hardship for consumers, including many who are indigent. To alleviate such hardship, federal and state laws should be changed to limit the amount that banks can freeze in accounts receiving exempt funds.” (p. ii-iv)
PUBLICATION DETAILSFormat: Research
Publication Type: Evaluation, Report
Geographic coverage, US: NATIONAL
Geographic coverage, World: North America
Topics: Legal Needs | Needs & Benefits
Case type: Consumer/Finance, Individual Rights
Practice Area: Consumer
Who Served: Consumers
How Provided: Alternative Dispute Resolution
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