Fall behind on paying a debt for any reason and you will likely experience the relentless pressure exerted by debt collectors. The Washington Attorney General’s Office (AGO) reports that in 2015, nearly 30 million consumers had an account in collections and that debt collectors made approximately 1 billion connections with consumers.1 While most contacts are within the bounds of the law, debt collection is a highly pressurized industry — pressure on agencies to collect outstanding debts and pressure on debtors to find a way to pay them.
Despite both federal and state regulation, there is no shortage of horror stories about debt collectors. According to a complaint filed by the Federal Trade Commission (FTC), the collection agency, Goldman Schwartz, not only falsely threatened to arrest debtors, but warned them after they went to jail, their children would be taken by child protective services.2
A manager at the agency disclosed debts to debtors’ employers, family members and military superiors, and asked them to help pay the debt.3 Not to be outdone, Rumson, Bolling & Associates threatened to dig up bodies of deceased children if funeral bills were not paid.4
In some cases, collection agencies pressure people for debts they do not owe, otherwise known as “phantom debt.”5 It is no surprise that in 2014 debt collectors became the most complained about industry, beating out the cable companies. Federal authorities received more than 280,000 consumer complaints in 2014 and the AGO received 1,121.6
Federal law regulates debt collectors with the Federal Debt Collection Protection Act (FDCPA).7 The FDCPA’s purpose is to eliminate abusive debt collection practices and ensure that non-abusive collectors do not suffer a competitive disadvantage.8 A debt collector is defined as a person whose principal purpose is the collection of any debts, or one who regularly collects or attempts to collect debts owed or due to another.9
The FDCPA prohibits debt collectors from harassing or abusing debtors and also making false or misleading representations.10 In particular, threats of violence or to harm a person’s reputation or property; the use of obscene language; and telephoning a person repeatedly or continuously with the intent to annoy, abuse or harass, violate the FDCPA.11
The lines, however, can sometimes be unclear. For example, a federal court in California held that a collector calling 54 times and leaving 24 messages on a work answering machine constituted harassment,12 whereas a Florida court ruled that a collector who called a debtor 57 times, including seven calls in one day, did not harass the debtor because the collector never spoke to the debtor, was never asked to stop calling, and never called back on the same day after leaving a message.13 A federal court in Georgia ruled that a debt collector threatening to get its money one way or another and asking the debtor what her problem was, because she was making the same salary as when she did pay her bills, was not abusive or harassing.14
Washington regulates collection agencies in RCW chapter 19.16. Collection agencies must be licensed and are prohibited from harassing, intimidating, threatening or embarrassing a debtor.15 Specifically, the statute identifies contacting consumers at an unreasonable hour, unreasonably frequently, threatening violence or prosecution, or using offensive language as prohibited contact.16 RCW § 19.16.260 also explicitly forbids calling more than three times in a single week and calling between 9 p.m. and 7:30 a.m.
Federal and state authorities enforce violations of these laws by applying pressure of their own, and have recently joined forces to do so. The FTC, the U.S. Department of Justice, state attorneys general (including Washington’s) and various regulatory agencies joined forces in Operation Collection Protection to combat abusive practices by debt collectors.17
Debt collectors running afoul of these laws are subject to penalties, fines and injunctions, and can even be banned from the industry.18 Under Washington law, a violation of RCW § 19.16.250 means that the debt collector, its customer or any other person seeking to recover the debt cannot recover any interest, service charge, collection costs, late fees or any other fees associated with the debt.19
Of course, many debt collectors operate within the bounds of the law, working to recover legitimate receivables for a wide variety of businesses and public agencies. The Association of Credit and Collection Professionals reports that debt collectors recovered approximately $55.2 billion in total debt in 2013.20 Additionally, although debt collectors may at times seem indefensible, debtors are not always very sympathetic. For example, in ruling against a debt collector, U.S. District Court Judge Marsha Pechman noted that the plaintiffs failed to pay for services for which they knew they had an obligation to pay, even after they were reminded to do so.21
Judging by the sheer volume of complaints against debt collectors, the pressure on all sides of debt collection will not subside anytime soon.
1 “AG Cracks Down on Unlawful Debt Collection Practices As Part of Operation Collection Protection” (hereinafter “AG Cracks Down”) (Nov. 4, 2015), available at http://www.atg.wa.gov/news/news-releases/ag-cracks-down-unlawful-debt-collection-practices-part-operation-collection.
2 FTC v. Goldman Schwartz, Inc., No. 4:13-cv-00106 (S.D. Tex. May 28, 2014) (Stipulated Order for Permanent Injunction and Monetary Judgment); see also Press Release, FTC Puts Texas-based Operation Permanently Out of the Debt Collection Business After It Allegedly Used Deception, Insults, and False Threats against Consumers (May 19, 2014), available at http://www.ftc.gov/news-events/press-releases/2014/05/ftc-puts-texas-based-operation-permanently-out-debt-collection.
4 “FTC Settlement Obtains Permanent Ban Against Abusive Debt Collection Operation” (Jan. 17, 2013), available at https://www.ftc.gov/news-events/press-releases/2013/01/ftc-settlement-obtains-permanent-ban-against-abusive-debt.
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