Complaints spike over debt collectors

• Reprints

Updated: November 10, 2011 5:29PM

The Federal Trade Commission says it receives more complaints from consumers about debt collectors than any other industry. Last year, it received 140,036 such complaints, up from 119,609 in 2009.

“They called me three or four times a day, every day, asking all kinds of personal questions, like am I married, do I have custody of my kids, can my kids pay this bill?” said Scott Tillman III, a 53-year-old musician from Oroville, Calif. He said he was harassed over an auto lease for a vehicle he returned to a dealership 15 years ago.

The most common consumer complaints against debt collectors involved three big no-nos under federal law: calling a debtor repeatedly or constantly; misrepresenting the amount or status of a debt; and failing to notify consumers of their rights in writing.

More than 20,000 people said debt collectors falsely threatened to have them arrested or seize their property, and more than 17,500 said collectors used profanity or abusive language on the phone. Nearly 4,200 consumers said a collector threatened them with violence if they did not pay up.

Businesses nationwide placed $150 billion worth of debt with collection agencies last year, said Harry Strausser III, president of the Mid-Atlantic Collectors Association. Of that total, agencies were able to collect about $40 billion.

“With unemployment the way it is and the terrible foreclosures, people are having a harder time making ends meet. There’s more potential business, and we’re having a tougher time trying to collect it,” said Strausser.

Collection agencies point out that unpaid debt is never truly written off: Someone has to eat it. An industry-sponsored study says debt collectors save the average household $354 a year in costs it otherwise would have been charged if businesses raised prices to cover losses instead of recovering it through a collection agency.

AP