The Federal Trade Commission will review the practices of the nation’s top debt buyers, who often hire the debt collectors that are drawing complaints from consumers.
When the debt-buying companies hire debt collectors, or assume the role on their own, mistakes are made that result in “debt collectors frequently try to collect from the wrong consumers or the wrong amounts, or both,” the FTC said.
Debt collection mistakes are on the rise as a result of increasing credit card charge-offs and fixed-term consumer loans that have defaulted as unemployment and foreclosure rates persist.
The FTC has sent orders to nine companies that buy consumer debt seeking information about their practices.
Debut buyers typically try to collect on the debt they purchases, and if they do not get paid, they often re-sell the debt to other debt buyers, the FTC said.
“Over the past decade, debt buyers have become a significant part of the debt collection system,” the FTC said.
In February 2009, the FTC reported that there were “major problems” in the flow of information among creditors, debt buyers, and collectors.
“Information the FTC gathers from the orders will allow it to determine how shortcomings in the flow of information affect debt buyers, debt collectors and consumers,” the FTC said.
Under its federal mandate, the FTC has the authority to seek such information from private companies. The Federal Trade Commission enforces federal law that protects consumers.
