Technology Puts Debt Collectors on Uncertain Legal Ground

According to a Government Accountability Office report (GAO-09-748) released today, modern communications technologies have blurred the former clarity of key provisions in the Fair Debt Collection Practices Act.

The first problem is that the FDCPA was written in 1977, before the advent of the commercial Internet, e-mail, voice mail, mobile phones and fax machines. (For my older readers, 1977 was the year Rocky won the Best Picture Oscar and Lindsay Wagoner won an Emmy for her work in The Bionic Woman. Days of bread and circuses for sure.)

Meanwhile, back at the Forum, Congress created the second problem. Congress designed the FDCPA to be frozen in time, by failing to give the Federal Trade Commission rulemaking authority to implement the act. What this means for debt collectors is that their ability to lawfully dun debtors via something other than a landline -- such as a fax machine, voice mail, e-mail, or mobile phone -- is substantially in doubt.

This is a big problem for debt collectors because, as we all know, the landline -- the leading communications technology of 1977 -- is the least likely place to reach anyone nowadays. One commenter to the GAO, the National Association of Retail Collection Attorneys, remarked that "conflicting court decisions have made regulatory compliance a guessing game, rather than a predictable endeavor."

Here are a few technology-related concerns mentioned in the GAO report:

Voice-mail and answering machines. Leaving a collection message on these devices is legally risky, because someone other than the debtor may overhear the message, causing an FDCPA violation.

Mobile phones. A debtor may be in a different timezone than the one suggested by the debtor's mobile phone area code. And the debtor's mobile service provider may charge for connecting the debt collector's call. This means that attempts to collect a debt via a mobile phone call could violate the FDCPA's rules on imposing telephone charges on consumers and on calling outside the lawful hours of 8 a.m. and 9 p.m.

Caller identification devices. The display of the debt collector's phone number on a caller identification device could be a violation of the FDCPA if someone other than the debtor sees the number. On the other hand, blocking caller identification information could be a violation of the FTC Act's prohibition on making a false or misleading statement.

E-mail messages and fax machines. These communications technologies are believed to create too high a risk that someone other than the debtor may read the transmission, in violation of the FDCPA's ban on disclosure to third parties.

Predictive dialers. Effective, perhaps, but these raise the risk of violating the FDCPA's prohibition on causing a phone to ring repeatedly with the intent to annoy or harass the debtor.

Another problem identified by the GAO is the post-1977 emergence of a debt collection industry where consumer debts and personal information are packaged and sold as "debt portfolios" among debt buyers and other intermediaries, creating doubt about the FDCPA's application to these new entities. Also creating business problems for debt collectors, many of whom did not directly deal with the original debtor, is the fact that they frequently lack good information about the collection history, prior consumer complaints, and the outcome of bankruptcy proceedings.

These and other problems led the GAO to call on Congress to update the FDCPA to take into account changes in the debt collection industry, to reflect changes in communications technologies, and to give the FTC rulemaking authority to implement any so-modified law. There is little good in the GAO's proposal for debtors. The clear thrust of the GAO's report is that the debt collection industry is having trouble effectively communicating with debtors, due in large part to fragmentation within the industry and due to the widespread adoption of communications technologies that have placed modern debt collection efforts on uncertain legal ground. And that Congress should do something about it. Eventual legislation might be an opportunity, however, for privacy rights advocates to insert consumer privacy protections into an area that, on the surface, seems to be rife with information processing and transfers and trade in sensitive personal information.

Comments

[LLF]

I agree with the GAO's first recommendation. The FDCPA really doesn't set out what "verification" means. Many collectors seem to rely on some shaky case law that they believe just requires them to provide nothing but a self serving "yeah, we checked, and yes you owe it" statement. Of course, this provides little to nothing to the consumer that is already skeptical about getting calls and letters from a company they have never done business with.