By Charlene Crowell
When many consumers think of billion-dollar industries, banks and Wall Street often come to mind. Yet there is another industry in the same lucrative league that affects more than 70 million consumers each year: debt collection.
In recent years, debt collection has consistently topped the list of consumer complaints received by the Federal Trade Commission, the Consumer Financial Protection Bureau and state Attorneys General. Further and according to the CFPB, more than 25 federal debt collection cases have been filed for deceiving and abusing consumers. Collectively, the cases have brought more than $300 million in restitution and another $100 million in civil penalties have resulted from these filings.
As state legislatures convene across the country for 2017 sessions, it appears that the National Black Caucus of State Legislators has taken note of the harms that are caused by illegal debt collection practices. An NBCSL resolution calling for an end to abusive debt collection practices was ratified during the group’s annual December meeting.
Sponsored by North Caro-lina Senator Floyd B. McKissick, Jr., the resolution notes that “the overwhelming majority of people who are in debt and being pursued by debt collectors are not in debt by choice; but due circumstances such as job loss, divorce or marital problems, and serious illness.”
Many Black neighborhoods are more likely to have residents with debts in collection. The resolution further states that our neighborhoods also have double the number of debt judgments compared to White areas regardless of income levels.
“Unfair, abusive, and deceptive debt collection practices are hurting consumers and as a result, court judgments are entered against people for debts they do not legally owe,” Senator McKissick said.
“The NBCSL resolution affirms the need for strong consumer protections at the state and federal level. This is critically important as abusive debt collection practices frequently target not only African-American communities, but seniors and military families as well.”
In calling for state legislatures to adopt initiatives requiring more detailed and accurate information and documentation in debt collection actions, the resolution also notes and supports CFPB’s efforts to promulgate a federal rule to address debt collection abuses.
Consumer advocates agree – a call for continued and coordinated support from both states and federal regulators is needed before consumers can find financial relief.
“States should continue to strengthen the rules and laws for debt collection to better protect consumers,” said Lisa Stifler, deputy director of State Policy with the Center for Responsible Lending. “Too often we’ve seen debt collectors file lawsuits in state courts against the wrong person or for a debt not owed. State legislatures and courts must stop this abusive financial practice by holding debt collectors accountable for initiating unwarranted legal actions.”
The need for reforms is supported by a recent CFPB report on consumer experiences with debt collection.
Among the survey findings: About 75 percent of consumers sued do not go to the court hearing, which generally makes them responsible for the debt; 53 percent of consumers reported receiving collection attempts that were incorrect because the debt was not theirs, was the wrong amount, or was owed by a family member; More than 40 percent of non-White consumers reported being contacted about a debt in collection, while only 29 percent of White consumers reported having the same experience.