In March 2018, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) reported on their 2017 activities to combat illegal debt collection practices. The CFPB handled approximately 84,500 debt collection complaints, making it one of the most prevalent topics of complaints about consumer financial products or services. The Bureau offered five sample letters that consumers may use when they interact with debt collectors.
The FTC resolved 10 cases against 42 defendants and obtained more than $64 million in judgements, focused on curbing egregious debt collection practices, including phantom departments, schools, non-profit organizations, banks, credit unions, other businesses and government agencies. The agency logged more than 60 million views on its webpages, with its videos seen more than 581,000 times at YouTube.com/FTC, and its consumer blogs reaching 199,860 (English) and 50,480 (Spanish) email subscribers.
For more information, click here.
- Ask students to review the major provisions of the Fair Debt Collection Practices Act.
- Let students debate the issue, “Can governmental agencies stop unlawful practices of the debt collection agencies that harm both consumers and legitimate business”.
- Is it possible to live without using any form of consumer credit?
- What can the governmental agencies do to protect the legal rights of all consumers in a manner that is efficient, effective, and accountable?
Know someone who’s behind on their bills? Maybe debt collectors are calling for payment? The Federal Trade Commission’s new debt collection video can help you understand your legal rights – and may lower your stress level. In the video, you’ll see how bad debt collectors try to get you to pay up. Bad debt collectors will say anything to get you to pay – and they’ll make it feel urgent to get you to pay immediately. But there are laws to protect you. Debt collectors:
- Can’t call you before 8 a.m. or after 9 p.m.
- Can’t use profanity, threaten violence or harass you to pay
- May not lie or pretend to be someone they’re not
- Cannot ask you to pay a debt that doesn’t even exist
- Can’t threaten you with arrest or deportation
- Cannot tell anyone – except your spouse or attorney – about your debt
If a debt collector calls and uses any of these tactics, hang up and report it to the FTC. Remember: you have the right to be treated fairly – no matter what.
For more information go to: consumer.gov/debt.
To view the video, click here.
- Ask students to summarize the steps they may take if a debt collector calls.
- Let students make a list of danger signals of potential debt problems.
- Which federal law regulates debt collection activities and protects consumers from abusive collection practices?
- Does the law erase the legitimate debts consumers owe?
Consumers across the country report that they’re getting telephone calls from people trying to collect loans the consumers never received or on loans they did receive for amounts they do not owe. Others are receiving calls from people seeking to recover on loans consumers received but where the creditors never authorized the callers to collect them.
The FTC is warning consumers to be alert for scam artists posing as debt collectors. It may be hard to tell the difference between a legitimate debt collector and a fake one.
A caller may be a fake debt collector if he/she:
- is seeking payment on a debt for a loan you do not recognize;
- refuses to give you a mailing address or phone number;
- asks for personal financial or sensitive information; or
- exerts high pressure to try to scare you into paying, such as threatening to have you arrested or to report you to a law enforcement agency.
For more information, click here.
- Ask students to make a list of protections provided by the Fair Collection Practices Act.
- Ask students to prepare a list of steps they should take if the harassment continues.
- If you think that a caller may be a fake debt collector, why is it important to ask the caller for his name, company, street address, or telephone number?
- If you think that a caller may be a fake debt collector, should you stop speaking with the caller? Why or why not?
New Protections Would Limit Collector Contact and Help Ensure the Correct Debt is collected
The Consumer Financial Protection Bureau (CFPB) is considering to overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt. Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect. As they are collecting, companies would be required to limit communications, clearly disclose debt details, and make it easier to dispute the debt. When responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence. These requirements and restrictions would follow the debt if it were sold or transferred.
For more information about the proposals under consideration, click here.
- Ask students what federal laws already prohibit debt collectors from harassing, oppressing, or abusing consumers.
- Ask students if they, their friends or relatives, have ever been harassed by creditors. If so, what were their experiences?
- Debt collection market generates more complaints to the Consumer Financial Protection Bureau than any other financial product or service. Why?
- What might be some common complaints against debt collectors seeking to collect debt from consumers?
In late July 2016, filed as part of Operation Collection Protection, the Federal Trade Commission (FTC) charged that BAM Financial used lies, threats, intimidation, and other illegal practices to extract payments from consumers. When obscene language, incessant calls, and harassment of family members didn’t get the results they wanted, the defendants got personal. For instance, the defendants told the parent of one purported debtor “No wonder your daughter is in such predicament with a mother like you.” The FTC alleges that they falsely stated to another consumer’s 84-year-old mother that they had a warrant for her daughter’s arrest and later told the consumer they were bounty hunters.
The FTC says BAM’s letters and phone calls were riddled with false threats of litigation. The complaint also charged that in numerous instances, the defendants didn’t follow up within five days of their initial communications with proper validation notices as the law requires.
The settlement with BAM Financial, Everton Financial, Legal Financial Consulting, Luis O. Carrera, and Robert Llaury bans them for life from debt collection agency industry.
For more information, click here.
- Ask students what consumer rights they have when dealing with debt collection agencies.
- Ask students to list important provisions of the Fair Debt Collection Practices Act.
- Nearly 30 million Americans have their accounts in collection, and debt collectors make as many as one billion contacts with people every year. Are these contacts legal?
- What types of debts are covered under the Fair Debt Collection Practices Act?
- How can you stop a debt collector from contacting you?
In September 2015, the Federal Trade Commission banned Kirit Patel and his company, Broadway Global Masters, from the debt collection business. Patel and his company illegally collected more than $5.2 million in fake payday loan debts. He also pleaded guilty to the Department of Justice on charges of criminal mail and wire fraud. Specifically, Patel’s company:
- Called people and pushed them to pay debts they didn’t really owed,
- Posed as law enforcement and fake government agencies like the “Federal Crime Unit of the Department of Justice”,
- Threatened to sue or arrest people—or tell their family and employers about a debt, and
- Recited people’s Social Security and bank account numbers to seem legit.
So how can you tell if you’re being targeted by a fake debt collector? A caller may be a fake debt collector if:
- You don’t recognize the debt,
- You can’t get a mailing address or phone number for the collector,
- You’re asked for personal financial or sensitive information, and
- You’re threatened with arrest or told you’ll be reported to a law enforcement agency.
For more information, click here.
- Ask students to prepare a list of steps they should take if they receive a call from a debt collection agency.
- Encourage students to visit a local office of the Consumer Credit Counseling Service. What assistance is available if the debt is legitimate, but the debt collector is not?
- What can governmental agencies do to stop scammers from bilking honest and innocent people?
- Why is it important to obtain and review your free credit reports at least once a year?
How can you verify whether or not a debt collector is legitimate? Below are a few warning signs that signal a debt collection scam:
- The debt collector threatens you. Legitimate debt collectors probably won’t claim that they will have you arrested or claim that they or their employee are law enforcement officers.
- The debt collector refuses to give you information about your debt or trying to collect a debt you do not recognize.
- The debt collector refuses to give a mailing address or phone number.
- The debt collector asks you for sensitive personal financial information.
Tell the caller that you refuse to discuss any debt until you get a written “validation notice.” This notice must include the amount of the debt, the name of the creditor, and a description of certain rights under the federal Fair Debt Collection Practices Act.
For additional information and to learn more on debt collection practices, click here.
- Ask students to draft a sample complaint letter explaining that the debt is not legitimate and demanding the debt collector stop contacting you.
- Ask students to compile a list of governmental and nongovernmental agencies where consumers can send debt collection complaints.
- Do all states require debt collectors to be licensed?
- If the debt collector is licensed in your state and he/she is not acting properly, what are your remedies?
- Who enforces the Fair Debt Collection Practices Act and how this law protects consumers?
In January 2015, the U.S. Department of Justice sued a Texas-based Commercial Recovery System, Inc., a debt collection company that allegedly impersonated attorneys, law firm staff, judicial employees and mediators. The company threatened people with lawsuits, seizure of their property, or wage garnishment. All these practices are against the law. Under federal law, debt collectors–including collection agencies, lawyers who collect debts, and companies that buy delinquent debts and then try to collect them–can’t use abusive, deceptive or unfair practices to collect from you.
For additional information, click here.
- Ask students to check a local Consumer Credit Counseling Service to learn about their services provided to consumers.
- Ask students to compile a list of places a person can call to report dishonest credit practices, get advice and help with credit problems.
- Which federal law(s) protect your rights if you are ever contacted by a debt collector?
- If you need help regaining control of your finances, what resources are available to you?
Calls from debt collectors can add to the stress of having financial problems. When these calls involve harassment, threats and intimidation, the situation can get worse–especially if you don’t know your rights
In 2014, the Federal Trade Commission filed a complaint against National Check Registry for violating the Fair Debt Collection Practices Act by using outrageous and intimidating methods to get people to pay debts immediately, often debts that were in dispute. The company will tell the victims that they had committed check fraud or another crime and threatening them with lawsuits, garnishments, arrest or imprisonment if they don’t pay within 12 or 24 hours.
According to the FTC complaint, National Check Registry has no authority to make arrests or seek other criminal punishments for failure to pay these debts.
For additional information go to
- Ask students what actions are commonly recommended if a person has difficulty making credit payments.
- Ask students to outline the actions they should take when they receive phony debt collection calls.
- Are debt collectors allowed to discuss your debt with anyone other than you, your spouse or your attorney?
- What can you do if you think that a debt collector has violated your rights?
If you do not pay your bills, you’ll probably get calls from debt collectors. Their job is to force you to pay or make arrangements to pay. But any debt collector who harasses or threatens you is breaking the law.
In August 2014, the Federal Trade Commission alleged that Credit Smart used illegal tactics to pressure people into paying debts. According to the Federal Trade Commission’s complaint, the company threatened to garnish peoples’ wages and sue them for nonpayment. The Federal Trade Commission’s complaint alleges that sometimes Credit Smart told people they owed debts and interest without having a reasonable basis to say so, misrepresented themselves as working for attorneys or a financial relief counselors, and failed to tell people they were debt collectors.
For additional information, go to
- Ask students what is the best way to solve debt problems before the delinquent account is turned over to debt collectors.
- What can people do to avoid debt problems in the first place?
- Why should people with debt problems seek the assistance of Consumer Credit Counseling Services?
- How can companies, such as Credit Smart, harass people when they know it is illegal to engage in such practices?
- What are the major provisions of the Fair Debt Collections Practices Act that specifically prohibit certain actions by debt collectors?