The FTC has taken its first enforcement action against the practice of “debt parking,” or “passive debt collection.” As noted in a press release, “debt parking can result in a consumer only finding out that a purported debt exists when his or her credit report is accessed in connection with buying a car or home, opening a credit card, or seeking employment. While the debts may not be valid, consumers can feel pressured to pay them off.”
Among other things, the defendant, Midwest Recovery Systems, was accused of (1) Furnishing inaccurate information to consumer reporting agencies in violation of the FCRA because the defendants knew or had reasonable cause to believe such information was inaccurate; (2) Failing to conduct reasonable investigations of direct disputes in violation of the FCRA and the FCRA Furnisher Rule; and (3) Failing to report the results of investigations to consumers in violation of the FCRA and the FCRA Furnisher Rule.
notes that the settlement is among the first FTC matters to address medical debt and that accuracy issues related to medical debt “are a particular concern.” The FTC also cautions debt collectors to “exercise caution at the intersection of debt collection and credit reports” in order to avoid “a steaming alphabet soup of FDCPA and FCRA violations.” It observes that prudent debt collectors “scrutinize questionable categories of debt and debts to questionable creditors” and “also contact consumers and listen to what they have to say before furnishing information to credit reporting agencies.”
Commissioners Rohit Chopra and Rebecca Slaughter issued statements about the settlement in which they urged the FTC to more closely cooperate with the CFPB in debt collection enforcement actions. Both commissioners commented that the CFPB’s authority to obtain civil penalties would allow victims to qualify for monetary redress from the CFPB’s Civil Penalty Fund, even if the penalty in a case were only $1. Commissioner Chopra observed in his statement that the FTC has not put various legal authorities granted to it by Congress since 2010 “to use in a meaningful way.” Such authorities include the FTC’s rulemaking authority over certain auto financing and sales practices and the FTC’s enforcement authority under the Military Lending Act and Congress’s related directive for the FTC to coordinate with the Federal Reserve Board and the CFPB to address abuses against military families in the auto sector. It is likely that the CFPB, under a new Director appointed by Joe Biden, will be receptive to greater cooperation with the FTC. In addition, in a Biden Administration, the FTC could become more aggressive in its use of the authorities cited by Commissioner Chopra.
CDIA has written before about Commissioner Chopra’s advocacy for greater enforcement muscle from the FTC.