For many Americans debt is a daily part of life -- and according to a new report from the Federal Trade Commission the debt collection industry causes them more pain than almost any other business.
The FTC received 140,036 complaints about debt collection in 2010, an increase of 17 percent from the 119,609 it received in 2009. Those numbers are higher than for any other industry.
"It tells me we need more law enforcement in debt collection and more guidelines," said Gail Hillebrand, director of Consumers Union's Defend Your Dollars campaign. "These things have been illegal for years and they are still taking place.
The Fair Debt Collection Practices Act of 1978 was intended to protect consumers from harassment, abuse, and deceptive collection practices -- precisely the complaints consumers made in record numbers last year.
54,147 consumers filed complaints claiming collectors harassed them with repeated calls. 27,554 reported they were falsely threatened with a lawsuit or other legal action. 4,182 said they were threatened with violence if they did not pay.
Joel Winston, associate director at the FTC, says many consumers do not know that collectors are required to provide a lot of information upfront when they first start collecting on a debt. Within the first five days, collectors must send consumers a written notice detailing the amount of debt, the name of the creditor and to whom the debt is owed.
The FTC said 29.8 percent of people claimed collectors never sent the mandatory notice.
"What's interesting is the number of complaints about third party creditors went up, while complaints against creditors collecting on their own did not," said Winston.
Third party creditors work for the original creditor and receive a fee or percentage of the money they are able to collect. In some cases they also buy old debt and try to collect where others have failed.
"This new industry of debt buyers has come out of the woodwork and grown exponentially," said Winston. "This is debt that others have already tried to collect on and have not been able to. They sell the debt for pennies on the dollar and others try to collect it. The information they have on the debt, which may have passed through three, four or five different companies, is often incomplete and they may be contacting the wrong people."
This is the last year the FTC will publish the annual report. In July, the Consumer Financial Protection Bureau is scheduled to open, and it will take over the responsibility. Although the CFPB will handle the report, the agencies will share many responsibilities and work together to enforce regulations.
Hillebrand said she has high hopes for the new agency.
"I think it will absolutely make a difference, it has a big job to do and this is one part of it."
The CFPB will have power the FTC does not have.
"The big difference I think is while the FTC does not have any rule-making ability, the new bureau will," said Winston. "The law (The Fair Debt Collection Practices Act) is obsolete in many areas and does not address many of the new technologies that are out there."