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The Federal Trade Commission issued a report today recommending that the debt collection legal system be reformed and modernized to reflect changes in consumer debt, the debt collection industry, and technology. The report describes the changes the FTC believes will provide better consumer protection without unduly burdening the debt collection industry. The Commission also issued its 31st annual report to Congress on the Fair Debt Collection Practices Act, which summarizes its enforcement of the FDCPA during 2008.

The FDCPA was enacted in 1977 to protect consumers from abusive, unfair, and deceptive practices by third-party debt collectors. Its primary government enforcer is the FTC, which in October 2007 hosted a two-day workshop for consumer groups, industry, academia, and government agencies to explore how collection industry changes have affected consumers and businesses.

In the workshop report issued today, the Commission cites major problems in the flow of information within the collection system. The report recommends changes in the law to require that collectors have better information, making it more likely that their efforts will be for the right amount and be directed to the right consumer. It also recommends that they be required to provide consumers with better information explaining their rights under the FDCPA. To improve the flow of information, the report recommends these changes to the FDCPA:

• Requiring that the “validation notices” that collectors are required to send to consumers also disclose the name of the original creditor; break down the debt by principal, total interest, and total fees; and inform consumers of certain rights they already have under the FDCPA.
• Requiring collectors to conduct “reasonable” investigations responsive to the specific dispute the consumer raised.

According to the workshop report, debt collection laws should be modernized to reflect changes in technology. Recognizing that the law generally should allow debt collectors broad use of communication technology to contact consumers, the report recommends that the law prevent consumers from incurring charges for these contacts or otherwise being subject to unfair, deceptive, or abusive acts and practices. The report recommendations include:

• Prohibiting collectors from contacting consumers via their mobile phones, including by text messaging, without prior express consent; and
• Requiring collectors who use new payment technologies to obtain express verifiable authorization from consumers before accessing their accounts.

The workshop report recognizes that certain debt collection litigation and arbitration practices appear to raise substantial consumer protection issues. Because the workshop record lacks sufficient information for the FTC to determine the nature and extent of these issues, the report announces that the agency will convene regional roundtables this year with state court judges and officials, debt collectors, collection attorneys, consumer advocates, arbitration firms, and other interested stakeholders to learn more and develop possible solutions.

The workshop report also recommends that Congress give the Commission authority to issue rules under the FDCPA. This would help ensure that legal requirements keep pace with changes in the marketplace.

The report states that private actions, not FTC actions, were intended by Congress to be the primary means of promoting industry compliance with the FDCPA, and notes that the amounts of statutory damages that consumers can obtain in lawsuits under the FDCPA have not changed since 1977. To increase deterrence, the report recommends increasing the damage amounts to reflect inflation since then, and, in the future, to increase them periodically.

Emphasizing the agency’s intention to continue its aggressive enforcement of the FDCPA, the report notes that the FTC has modified its law enforcement approach in order to obtain tough permanent injunctive and equitable relief, including substantial monetary judgments and, for some defendants, bans on collecting debts. The Commission also has taken more actions against the individuals, and not just the companies, responsible for illegal collection practices.

Annual Report to Congress on the FDCPA

The Annual Report to Congress on the FDCPA summarizes the number and types of consumer complaints the Commission received about third-party debt collectors in 2008, and law enforcement actions the agency brought against debt collectors last year. The FTC received more than 78,000 complaints about third-party debt collectors in 2008. While this is a slight decrease as a percentage of all complaints received compared to 2007, the FTC continued to receive more complaints about debt collectors than any other industry.

The Commission votes to issue the reports were 4-0.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC ’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

[FTC File Nos. P074805 (Workshop Report) & P094804 (Annual Report)]
(Debt Collection Reports)

The Federal Trade Commission today released the list of top consumer complaints received by the agency in 2008. The list, contained in the publication “Consumer Sentinel Network Data Book for January-December 2008,” showed that for the ninth year in a row, identity theft was the number one consumer complaint category. Of 1,223,370 complaints received in 2008, 313,982 – or 26 percent – were related to identity theft.

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and other complaints.  In addition, the report sets forth the 50 metropolitan areas reporting the highest incidence of identity theft.

The report states that credit card fraud was the most common form of reported identity theft at 20 percent, followed by government documents/benefits fraud at 15 percent, employment fraud at 15 percent, phone or utilities fraud at 13 percent, bank fraud at 11 percent and loan fraud at four percent.

The top 20 complaint categories were:

Rank	Category	Complaints	%
1	Identity Theft	313,982	26
2	Third Party and Creditor Debt Collection	104,642	9
3	Shop-at-Home and Catalog Sales	52,615	4
4	Internet Services	52,102	4
5	Foreign Money Offers and Counterfeit Check Scams	38,505	3
6	Credit Bureaus, Information Furnishers and Report Users	34,940	3
7	Prizes, Sweepstakes and Lotteries	33,340	3
8	Television and Electronic Media	25,930	2
9	Banks and Lenders	22,890	2
10	Telecom Equipment and Mobile Services	22,387	2
11	Computer Equipment and Software	21,442	2
12	Business Opportunities, Employment Agencies and Work-at-Home	20,286	2
13	Internet Auction	17,294	1
14	Advance-Fee Loans and Credit Protection/Repair	17,263	1
15	Health Care	16,275	1
16	Auto Related Complaints	14,278	1
17	Travel, Vacations and Timeshare Plans	13,200	1
18	Credit Cards	13,196	1
19	Magazines and Buyers Clubs	10,188	1
20	Telephone Services	9,300	1

The FTC collects consumer complaints from more than 125 other organizations and makes them available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad via Consumer Sentinel, a secure, online database. Copies of the “Consumer Sentinel Network Data Book” can be found at http://www.ftc.gov/sentinel.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC ’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

The Federal Trade Commission today released the list of top consumer complaints received by the agency in 2008. The list, contained in the publication “Consumer Sentinel Network Data Book for January-December 2008,” showed that for the ninth year in a row, identity theft was the number one consumer complaint category. Of 1,223,370 complaints received in 2008, 313,982 – or 26 percent – were related to identity theft.

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and other complaints.  In addition, the report sets forth the 50 metropolitan areas reporting the highest incidence of identity theft.

The report states that credit card fraud was the most common form of reported identity theft at 20 percent, followed by government documents/benefits fraud at 15 percent, employment fraud at 15 percent, phone or utilities fraud at 13 percent, bank fraud at 11 percent and loan fraud at four percent.

The top 20 complaint categories were:

Rank	Category	Complaints	%
1	Identity Theft	313,982	26
2	Third Party and Creditor Debt Collection	104,642	9
3	Shop-at-Home and Catalog Sales	52,615	4
4	Internet Services	52,102	4
5	Foreign Money Offers and Counterfeit Check Scams	38,505	3
6	Credit Bureaus, Information Furnishers and Report Users	34,940	3
7	Prizes, Sweepstakes and Lotteries	33,340	3
8	Television and Electronic Media	25,930	2
9	Banks and Lenders	22,890	2
10	Telecom Equipment and Mobile Services	22,387	2
11	Computer Equipment and Software	21,442	2
12	Business Opportunities, Employment Agencies and Work-at-Home	20,286	2
13	Internet Auction	17,294	1
14	Advance-Fee Loans and Credit Protection/Repair	17,263	1
15	Health Care	16,275	1
16	Auto Related Complaints	14,278	1
17	Travel, Vacations and Timeshare Plans	13,200	1
18	Credit Cards	13,196	1
19	Magazines and Buyers Clubs	10,188	1
20	Telephone Services	9,300	1

The FTC collects consumer complaints from more than 125 other organizations and makes them available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad via Consumer Sentinel, a secure, online database. Copies of the “Consumer Sentinel Network Data Book” can be found at http://www.ftc.gov/sentinel.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC ’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

In a case filed by the Federal Trade Commission and the State of Nevada, a federal court has ordered a halt to certain practices by seven U.S.-based companies and an individual operating as part of an international Internet payday lending operation. They were charged with failing to disclose key loan terms and using abusive and deceptive collection tactics in violation of federal and state laws. The U.S.-based companies and their principal agreed to the court order, which will remain in effect pending trial. The FTC and Nevada seek to permanently bar the defendants from future violations and make them give up the money they obtained using the allegedly illegal collection tactics.

According to the FTC’s complaint, the companies offered loans of $500 or less within 24 hours without requiring a credit check, proof of income, or documentation. Consumers were told that they qualified for a loan that had to be repaid by their next payday with a fee ranging from $35 to $80, and that if the loan was not repaid by then, it would be extended automatically for an extra fee that would be debited from the consumer’s bank account “until the loan is repaid.”

The FTC charges the companies with violating the FTC Act by using unfair and deceptive collection tactics, including falsely threatening consumers with arrest or imprisonment, falsely claiming that consumers are legally obligated to pay the debts, threatening to take legal action they cannot take, repeatedly calling consumers at work and using abusive and profane language, and disclosing consumers’ purported debts to co-workers, employers, and other third parties. They also allegedly violated the Truth in Lending Act and Regulation Z by failing to make required written disclosures, clearly and conspicuously, before consummating a consumer credit transaction, including the amount financed, itemization of the amount financed, the finance charge, the annual percentage rate, the payment schedule, the total number of payments, and any late payment fees.

Pending trial, the court order bars the U.S.-based companies and their principal from deceptive debt collection practices such as misrepresenting that consumers can be arrested or imprisoned for failing to pay debts, that consumers are legally obligated to pay the full amount of a debt claimed as owed, and that for nonpayment consumers may or will be subject to legal action, such as a lawsuit, seizure of property, or garnishment of wages. The preliminary injunction also prohibits unfair collection practices such as continuously and repeatedly calling consumers and third parties at consumers’ work places, using obscene or threatening language toward consumers and third parties, and disclosing the existence of consumers’ purported debts to third parties.

The U.S.-based companies and their principal also are barred from violating the Truth in Lending Act and Regulation Z, in the extension of closed-end credit, by failing to make the required TILA disclosures as provided by law, and by failing in any other manner to comply with TILA and Regulation Z. They also are prohibited from violating the laws of the State of Nevada by making loans from Nevada or identifying Nevada as the source of a loan or as their principal place of business, unless properly licensed; and by failing to provide notice and disclosure of all material facts as required by state law, including failing to disclose the location, physical address, and non-toll-free telephone number of all of their locations. In addition, the U.S.-based companies and their principal are prohibited from violating any state or federal law regarding the sale or lease of goods or services, including using coercion, duress, or intimidation in any kind of transaction.

The injunction also bars the U.S.-based companies and their principal from disclosing or benefitting from customers’ personally identifiable or financial information, and it contains record-keeping provisions to allow the FTC to monitor compliance with the order.

The defendants named in the court order are Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Lotus Leads, Inc., First4Leads, Inc., and Rovinge International, Inc., and Jim Harris. Also charged in the complaint but not named in the order are four United Kingdom-based companies operating in the U.S. as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., and Interim Cash, Ltd., and their principals, Aaron Gershfield and Ivor Gershfield.

NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. These complaints are not a finding or ruling that the respondents have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC ’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. 0723093)
(Cash Today PI)

In a case filed by the Federal Trade Commission and the State of Nevada, a federal court has ordered a halt to certain practices by seven U.S.-based companies and an individual operating as part of an international Internet payday lending operation. They were charged with failing to disclose key loan terms and using abusive and deceptive collection tactics in violation of federal and state laws. The U.S.-based companies and their principal agreed to the court order, which will remain in effect pending trial. The FTC and Nevada seek to permanently bar the defendants from future violations and make them give up the money they obtained using the allegedly illegal collection tactics.

According to the FTC’s complaint, the companies offered loans of $500 or less within 24 hours without requiring a credit check, proof of income, or documentation. Consumers were told that they qualified for a loan that had to be repaid by their next payday with a fee ranging from $35 to $80, and that if the loan was not repaid by then, it would be extended automatically for an extra fee that would be debited from the consumer’s bank account “until the loan is repaid.”

The FTC charges the companies with violating the FTC Act by using unfair and deceptive collection tactics, including falsely threatening consumers with arrest or imprisonment, falsely claiming that consumers are legally obligated to pay the debts, threatening to take legal action they cannot take, repeatedly calling consumers at work and using abusive and profane language, and disclosing consumers’ purported debts to co-workers, employers, and other third parties. They also allegedly violated the Truth in Lending Act and Regulation Z by failing to make required written disclosures, clearly and conspicuously, before consummating a consumer credit transaction, including the amount financed, itemization of the amount financed, the finance charge, the annual percentage rate, the payment schedule, the total number of payments, and any late payment fees.

Pending trial, the court order bars the U.S.-based companies and their principal from deceptive debt collection practices such as misrepresenting that consumers can be arrested or imprisoned for failing to pay debts, that consumers are legally obligated to pay the full amount of a debt claimed as owed, and that for nonpayment consumers may or will be subject to legal action, such as a lawsuit, seizure of property, or garnishment of wages. The preliminary injunction also prohibits unfair collection practices such as continuously and repeatedly calling consumers and third parties at consumers’ work places, using obscene or threatening language toward consumers and third parties, and disclosing the existence of consumers’ purported debts to third parties.

The U.S.-based companies and their principal also are barred from violating the Truth in Lending Act and Regulation Z, in the extension of closed-end credit, by failing to make the required TILA disclosures as provided by law, and by failing in any other manner to comply with TILA and Regulation Z. They also are prohibited from violating the laws of the State of Nevada by making loans from Nevada or identifying Nevada as the source of a loan or as their principal place of business, unless properly licensed; and by failing to provide notice and disclosure of all material facts as required by state law, including failing to disclose the location, physical address, and non-toll-free telephone number of all of their locations. In addition, the U.S.-based companies and their principal are prohibited from violating any state or federal law regarding the sale or lease of goods or services, including using coercion, duress, or intimidation in any kind of transaction.

The injunction also bars the U.S.-based companies and their principal from disclosing or benefitting from customers’ personally identifiable or financial information, and it contains record-keeping provisions to allow the FTC to monitor compliance with the order.

The defendants named in the court order are Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Lotus Leads, Inc., First4Leads, Inc., and Rovinge International, Inc., and Jim Harris. Also charged in the complaint but not named in the order are four United Kingdom-based companies operating in the U.S. as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., and Interim Cash, Ltd., and their principals, Aaron Gershfield and Ivor Gershfield.

NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. These complaints are not a finding or ruling that the respondents have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC ’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. 0723093)
(Cash Today PI)

The Federal Trade Commission staff will host a forum on March 12, 2009 to gather input for its upcoming education program on advertising literacy for “tweens,” or kids who are 8 to 12 years old. At the forum, experts on advertising and marketing to kids will discuss a range of issues, including:

• what kids experience in the commercial world;
• what kids understand about their experience; and
• what consumer education efforts will help kids to navigate better in the commercial world.

The goal of the campaign is to educate kids to be better informed consumers of information.

The agenda and other details are available at http://www.ftc.gov/bcp/workshops/aditup. The event is free and open to the public. The forum will be held at the FTC’s satellite building conference center, located at 601 New Jersey Avenue, N.W., Washington, DC. A government-issued photo ID is required for entry. Pre-registration is not required. Members of the public and press who cannot attend can view a live webcast of the workshop on the FTC’s Web site.

Reasonable accommodations for people with disabilities are available upon request. Requests for such accommodations should be submitted via e-mail to Carrie McGlothlin at [email protected] or by calling 202-326-3388. Such requests should include a detailed description of the accommodations needed and a way to contact you if we need more information. Please provide advance notice.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC ’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(advertising literacy FYI – 2/20/09)