After years of writing about shady practices by debt collectors, it’s nice to finally write that there’s a small bit of justice in this world. Today, the Federal Trade Commission announced a $2.5 million civil penalty against Asset Acceptance, one of the country’s largest debt collectors, for making misrepresentations and deceiving consumers in the name of collecting debts.

Asset Acceptance had been charged with the following nine counts:
* misrepresenting that consumers owed a debt when it could not substantiate its representations;
* failing to disclose that debts are too old to be legally enforceable or that a partial payment would extend the time a debt could be legally enforceable;
* providing information to credit reporting agencies, while knowing or having reasonable cause to believe that the information was inaccurate;
* failing to notify consumers in writing that it provided negative information to a credit reporting agency;
* failing to conduct a reasonable investigation when it received a notice of dispute from a credit reporting agency;
* repeatedly calling third parties who do not owe a debt;
* informing third parties about a debt;
* using illegal debt-collection practices, including misrepresenting the character, amount, or legal status of a debt; providing inaccurate information to credit reporting agencies; and making false representations to collect a debt; and
* failing to provide verification of the debt and continuing to attempt to collect a debt when it is disputed by the consumer.

In addition to the $2.5 million penalty, Asset Acceptance must now investigate any disputed debt and ensure that it has a reasonable basis for claiming the consumer owes the debt before it continues its collection efforts. And the company can’t place debt on consumers’ credit reports without notifying them about the negative report.

Last year, Consumers Union and the East Bay Community Law Center issued a report on debt collection issues [PDF] in which they urged courts, states and federal regulators to enact a number of reforms, including:

• End robo-signing and attempts to collect without proper documentation: Debt collectors should be required to document that they are attempting to collect from the right person, for the right amount, and on a debt that they can lawfully recover.

• Establish a sell by date for all debt: It should be illegal to sell or attempt to collect debt that is more than seven years old, which is too old to be reported on a credit report under the federal Fair Credit Reporting Act.

• Require debt collectors to provide more information to consumers: All debt collectors, including debt buyers, should be required to identify the name of the original creditor and to provide an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, and to provide detailed records about the debt to consumers within five days after the first notification.

• Require debt collectors to submit more detailed information when filing suit: Debt collectors should be required to submit basic information about the debt, including the name of the original creditor and an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, when they sue over a debt, so that the consumer can see if it is his or her debt, and in the right amount.

• Increase oversight to ensure consumers are properly notified of lawsuits: Courts should be required to provide supplemental notice of all filed debt collection lawsuits to debtors and default judgments should be prohibited if the notice is returned to the court as undeliverable.

Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception [FTC.gov]

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