FTC Issues New Report on the Collection Industry
July 12, 2010
FTC Commissioner Julie Brill announces report to ACA Convention attendees.
Congress just passed sweeping financial reforms, including formation of a new regulatory body overseeing the collection industry. The Federal Trade Commission continues to report increasing complaints about collection agencies. The recession has put more people in financial straits, thus shining an increasingly bright spotlight on debt issues. With so many factors at play, it seems as though all eyes in Washington are focused on the collection industry and vice versa.
Speaking Monday at ACA International's Annual Convention, FTC Commissioner Julie Brill announced a new report from the agency, “Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration.” She provided an overview of the report.
The FTC's new report also addresses concerns about requiring consumers to resolve debt collection disputes through binding arbitration without meaningful choice, bias or the appearance of bias in arbitration proceedings, and procedural unfairness in arbitration proceedings. In its new report, the commission's principal recommendations regarding debt collection arbitration are:
Consumers should have a meaningful choice about arbitrating debt collection disputes.
Arbitration forums and arbitrators should eliminate bias and the appearance of bias.
Arbitration forums should conduct proceedings in a manner that makes it more likely that consumers will participate.
Arbitration forums should require that awards contain more information about how the case was decided and how the award amount was calculated.
Arbitration forums should make their process and results more transparent.
The FTC committed to closely monitor debt collection arbitration and evaluate whether creditors and arbitration forums provide consumers with meaningful choice and a fair process. The commission also said that, as appropriate, it will report its views on new debt collection arbitration models to policymakers, industry, consumer groups and the general public.
The FTC believes that reforms such as those discussed in the report should be made to ensure the debt collection litigation and arbitration systems adequately protect consumers without unduly burdening the debt collection system, which helps keep credit prices low and helps ensure consumer credit remains widely available.
The commission vote to issue the report was 5-0. Brill issued a concurring statement in which she urged Congress to enact a temporary ban on the mandatory arbitration of consumer debt collection disputes.
“Such a ban should remain in place until the arbitration process can be shown to be fair, transparent and as affordable as traditional litigation, and until consumers have a meaningful opportunity to opt out of pre-dispute arbitration without losing access to the credit services they seek,” she said.
An electronic version of the report text is available at http://www.ftc.gov/os/2010/07/debtcollectionreport.pdf.
