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Fair Debt Collection: 1.3.1.3 Mental Health and Consumer Debt

Indebtedness is associated with poor mental health.92 This relationship remains significant even after controlling for socioeconomic status and other factors.93 Several studies have shown that debt is a risk factor for depression,94 anxiety,95 substance abuse,96 and mental disorders.97 The psychological burdens of carr

Fair Debt Collection: 1.3.1.6 Older Americans and Debt Collection

Among families headed by older Americans, the percentage who are in debt has increased in recent years.148 Data from the Board of Governors of the Federal Reserve System showed that more than half of families with a reference person age seventy-five or older were in debt in 2019, compared to less than a quarter of similar families in 1989.149 Indebtedness of households with individuals age 65–74 has also increased.150

Fair Debt Collection: 1.3.1.7 Servicemembers, Veterans, and Debt Collection

In 2021, the Military Family Lifestyle Survey found that 51% of active-duty family respondents with credit cards carried a balance from month to month, with 16% reporting credit card balances of more than $20,000.171 Consumer debt can negatively impact the careers of military personnel and some debt collectors attempt to use this to leverage payments from servicemembers.172 The Consumer Financial Protection Bureau has highlighted a variety of abusive debt collect

Fair Debt Collection: 1.3.2 Consumer Attorneys

The “Find an Attorney” feature on the National Association of Consumer Advocates’ website206 lists hundreds of lawyers with “debt collection” as one of their practice areas. The “debt collection” practice area includes both attorneys who specialize in defending consumers who have been sued in a collection action and those who sue debt collectors for violations of the Fair Debt Collection Practices Act and other state and federal consumer protection statutes.

Fair Debt Collection: 1.3.3 Original Creditors

Original creditors are entities that provide extensions of credit such as banks, credit unions, student loan lenders, auto lenders, and payday lenders. Additionally, some original creditors provide goods or services on credit, such as utility companies, medical providers, and cell phone companies.

Original creditors frequently employ people in-house to collect on their delinquent accounts. In a survey of credit card issuers conducted by the CFPB, all respondents conducted at least some collection activity in-house.207

Fair Debt Collection: 1.3.4.1 Generally

Debt buyers are companies that purchase debts from original creditors, intermediaries, or other debt buyers. Debts are purchased for pennies on the dollar. The debt buyer may either try to collect the debts themselves, place them for collection with debt collectors, or sell the debts to other debt buyers.

In 2019, the CFPB estimated that there were 330 debt buyers in the United States, noting that many debt buyers also collect consumer debts owed to other owners.211

Fair Debt Collection: 1.3.4.3 Average Price of Debt

Debt buyers purchase debt for pennies on the dollar, but the exact amount depends on a variety of factors such as the type of debt, the age of the debt, the number of times that it was previously placed for collection, and the amount of debt for sale in the market at that time.

Fair Debt Collection: 1.3.4.4 Age of Purchased Debt

The most comprehensive data available about the age of debts being collected by debt buyers comes from a 2013 FTC study of the debt-buying practices of some of the nation’s largest debt buyers.240 This study found that nearly twenty-five percent of debt acquired from the original creditor, and more than sixty percent of debt purchased from other debt buyers, was over three years old at the time of purchase.241 More than thirty percent of the debt purchased from other debt buyers was over six yea

Fair Debt Collection: 1.3.4.5 Identifying Some of the Largest Debt Buyers

Using data from the Nilson Report, the FTC compiled a chart of the ten largest companies purchasing credit card debt from credit card issuers from 2005 to 2011.246 In 2011, Sherman Financial Group, L.L.C. (subsidiaries include LVNV Funding, L.L.C. and Resurgent Capital Services, L.P.) ranked first, Encore Capital Group, Inc. (subsidiaries include Midland Funding, L.L.C.

Fair Debt Collection: 1.3.5.1 First-Party Collection

Some creditors, like credit card issuers, hire “first-party” collectors, which the CFPB defines as “outside collectors who work under the name and direction of the creditor when collecting on delinquent debt.”253 One collection industry analyst reports that, “[t]he primary difference between first- and third-party collections is the stage at which the service occurs; first-party work occurs earlier in the receivable’s life cycle, typically when a delinquent account is under 90 days past due and has not yet been charg

Fair Debt Collection: 1.3.5.2.1 Introduction

Third-party debt collection agencies are hired to collect accounts that are owned by original creditors or debt buyers. They are “third-party” collectors because they collect in their own name for debts that are owned by other entities.

Fair Debt Collection: 1.5.1 Collection Management System

Many collectors use sophisticated software to “maintain [ ] account-level information about debts in collection, make [ ] the information available to individual collectors, and track [ ] account activity such as calls made, the outcome of discussions with consumers, and payments made.”508 In a 2021 TransUnion survey of debt collection agencies, 79% reported using collection management software and 34% reported using compliance software.

Fair Debt Collection: 1.5.2 Websites and Portals

Many collectors maintain their own websites, which may need to be copied or downloaded (using software created for that purpose) in order to preserve the information for evidentiary purposes, since web pages change frequently at some sites. Older versions of a web page are often available on www.archive.org.

Fair Debt Collection: 1.5.5 Collection Analytics

Debt buyers and debt collectors regularly gather data about consumers and also about their own internal collection practices. Increasingly, they use analytics software to evaluate this data and make decisions based on their evaluation.

Fair Debt Collection: 15.1.1 Overview

The oldest legal approach to debt collection abuse is an action in tort. There are distinct advantages and disadvantages to a tort approach to remedying abusive debt collection conduct. One major advantage in most states is the availability of punitive or exemplary damages for tortious conduct that is malicious or reckless.1 Another major advantage is that tort claims are available against creditors and their agents who may not be subject to the Fair Debt Collection Practices Act (FDCPA) or some states’ consumer protection statutes.

Fair Debt Collection: 15.1.2.1 FDCPA and State Debt Collection Statutes Do Not Preempt Tort Claims

The Fair Debt Collection Practices Act contains broad non-preemption language, stating that the Act does not “annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any state with respect to debt collection, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency.”13 This language makes it clear that the FDCPA is intended only to set minimum standards; states are free to provide greater protec

Fair Debt Collection: 15.2.6 Recovery of Emotional Distress Damages for Other Collection Torts

Emotional distress damages may also be available for other debt-related causes of action.162 Courts are more likely to find emotional distress damages available if the cause of action sounds in tort rather than in contract163 and if the defendant’s actions were intentional.164 The standard of proof to recover emotional distress damages for other torts may be less stringent than for a claim of intentional or negligent infliction of emotional distres