Who's Killing the CFPB? We Are.

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In the same year the Federal Trade Commission received 140,036 consumer complaints about attempts made to collect that debt, up 17% from 2009. There was only one consumer fraud category for which more complaints were registered with the FTC—and that was, of course, identity theft. The FTC does not keep count of complaints made to state consumer protection agencies, police departments, or law firms—so the number of actual consumer complaints about debt collection practices was likely geometrically larger.

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The FTC regulates many things, including things like large-scale mergers between multinational oil companies, and Verizon's proposed $3.6 billion deal with the cable companies. It seems unlikely that your complaint about getting that 3 a.m. phone call will get much attention, doesn't it? Worse, the agency is statutorily unable to do much. It enforces the Fair Debt Collection Practices Act, a 1978 statute that is good as far as it goes, but since it was written before things like cell phones and computers, it leaves a lot to be desired.

Moreover, the FTC has no authority to issue rules or regulations pursuant to the act, which is one of the principal reasons that the CFPB was created in the first place.

Looking at the kinds of abuses that have been reported is enough to make anyone lose sleep, even if you are pathologically punctual about paying your bills. Late-night calls, robo-calls, calls to neighbors and friends, threats of lawsuits and much worse are commonplace. Then there are the out-and-out frauds. Consider a recent California case brought by the Federal Trade Commission against Rincon Management Services, LLC.

According to the complaint, Rincon employees contacted consumers and told them that that they would be sued or arrested, if they did not call back promptly.

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"They gave them a phony case number making it sound like it was a filed case in court, all in what was an apparent attempt by the debt collector to get the debtor to call back," said Thomas Syta, assistant regional director for the FTC, in an interview with CaliforniaWatch.org.

If true, this may have been a reasonably successful tactic, as Rincon had earned at least $9.4 million since 2009, allegedly doing business under at least 10 different names, with 10 different "shell" corporations.

According to the complaint, the lawsuits and garnishments referred to by the debt collectors over the phone in this case were imaginary; in other cases the debts themselves were imaginary, but many people paid them anyway just to stop the harassment.

Unfortunately, this is what allegedly happens when a business that can create quick and large personal rewards for unscrupulous behavior—behavior which can be rendered more effective and more illegal by technological means—remains virtually unregulated.

Except for large, organized, and often nationwide abuses, the FTC is generally toothless absent the ability to promulgate regulations. And although almost every state has some kind of equivalent to the Fair Debt Collection Practices Act, most often enforcement procedures and staffing are underfunded and many cases are never brought.

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