FTC Orders Buyers of Consumer Debt to Submit Information for Study of Debt Purchasing Industry

The Federal Trade Commission has ordered the nation’s largest consumer debt buyers to turn over information about their practices in buying and collecting consumer debt, which the FTC intends to use for a study of the debt-buying industry. Consumers have reported that debt collectors frequently try to collect from the wrong consumers or the wrong amounts, or both. The FTC is seeking information to determine whether buyers of consumer debt are contributing to these problems.

The FTC sent the orders to nine companies that are in the business of buying consumer debts and then trying to collect on those debts, either on their own or by hiring debt collection firms. These nine companies collectively purchase about 75 percent of the debt sold in the United States.

Creditors often sell debt they have been unable to collect to companies known as debt buyers. When debts are sold, the buyers receive information about the debtor and the debt from the sellers. Debt buyers try to collect on the debt they purchase, and if they do not get paid, they often sell the debt to other debt buyers. Many debts are purchased and resold several times over a period of years before all collection efforts finally cease.

Over the past decade, debt buyers have become a significant part of the debt collection system. In February 2009, the FTC issued a report based on an agency Debt Collection Workshop in which it found 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 agency has authority to issue the orders under Section 6(b) of the FTC Act.