By Natalie DeCoste
The Federal Trade Commission (FTC) has provided the Consumer Financial Protection Bureau (CFPB) with an update regarding the FTC’s activities covering the debt collection market during 2020.
Following a request from the CFPB Director, Kathleen Kraninger, on Jan. 5, 2021, the FTC provided an update to the CFPB in the form of an annual summary of the agency’s actions in the debt collection market.
The FTC and the CFPB share enforcement responsibility for the Fair Debt Collection Practices Act (FDCPA), which makes it illegal for debt collectors to use abusive, unfair, or deceptive practices when they collect debts. Under the FDCPA, the CFPB provides an annual report to Congress about debt collection enforcement activities.
The FTC’s letter to the CFPB outlined several ways that the FTC remained committed to combatting unfair, deceptive, and otherwise unlawful debt collection practices with its law enforcement activities.
The letter noted that the FTC led Operation Corrupt Collector, a nationwide federal-state law enforcement sweep and outreach initiative targeting phantom debt collection and abusive and threatening debt collection practices.
“In September 2020, the Commission announced Operation Corrupt Collector, a coast-to-coast law enforcement crackdown on ‘phantom debt collection’—the practice of coercing consumers to pay debts that either do not exist or that they do not owe—and other egregious debt collection practices,” read the FTC’s letter.
As part of the operation, the FTC initiated three law enforcement actions, the National Landmark Logistics, Absolute Financial Services, and Critical Resolution Mediation. In all three of these matters, litigation is ongoing.
The FTC also filed or resolved seven cases against 39 defendants and obtained $26 million in Judgments. The agency brought the first federal action combatting unlawful “debt parking” in 2020.
For the debt parking matter, the FTC took action against a debt collection company and its owners that allegedly reported debts to credit reporting agencies without first communicating with the consumer about the debt. The complaint notes that there were reported phantom payday lending debts, and the company parked significant quantities of purported medical debt, which is often a source of confusion and uncertainty for consumers because of the complex, opaque system of insurance coverage and cost-sharing.
The FTC also banned the operator of a debt collection scheme who engaged in severe and repeated violations of law from ever working in debt collection again.
“In February 2020, the Commission and the New York Attorney General settled claims against Robert Heidenreich, the operator of a debt collection scheme in Campbell Capital. According to the October 2018 complaint, he and the companies he controlled lied to consumers about how much debt they owed and used illegal scare tactics to collect it,” read the FTC’s letter.
Some of the debt collectors or the defendant in the case pretended to work for law enforcement agencies and threatened consumers with arrest. Other collectors claimed to work on behalf of attorneys and falsely told consumers they would face lawsuits if they did not pay the phony debt.
The information from the FTC’s letter was factored into the CFPB’s FDCPA 2021 annual report published March 22. The 55-page report “highlights efforts by the CFPB and the Federal Trade Commission (FTC) to protect consumers, particularly those who have suffered profound financial impacts due to the COVID-19 pandemic,” according to the CFPB’s press release.
One of the major takeaways from the report was the large volume of complaints submitted to the CFPB. The report revealed that the CFPB handled approximately 542,300 complaints last year, roughly a 54% increase over 352,400 complaints the agency handled in 2019.
“The pandemic has been among the most disruptive long-term events we will see in our lifetimes. Not surprisingly, the shockwaves it sent across the planet were felt deeply in the consumer financial marketplace. Consumer complaints provide the CFPB with an important real-time window into where consumers encounter problems in the marketplace. The CFPB expects companies to respond to these concerns and that consumers receive responses from companies that address the issues consumers raise in their complaints,” said CFPB Acting Director Dave Uejio.
Credit and consumer reporting complaints accounted for more than 58% of complaints the agency received. Debt collection accounted for 15% of the complaints, credit card 7%, checking or savings 6%, and mortgage complaints 5%.
