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Sen. Al Franken

David Brewster, Star Tribune

Franken moves to curb abusive debt collection

  • Article by: DAVID SHAFFER
  • Star Tribune
  • September 27, 2010 - 12:15 PM

Alarmed by abuses in the debt collections industry, Sen. Al Franken said Sunday that he will introduce legislation to ban the use of arrest warrants by private firms and other practices he says are unfair to consumers.

"I was shocked when I read the Star Tribune series about this," said Franken, D-Minn. "... Sometimes you pick up the paper and you say, 'Holy moley, we have to do something about this.'"

Hounded, a Star Tribune investigative series published over the summer, exposed debt collectors' aggressive tactics, including the increasing use of arrest warrants and the seizures of paychecks and bank accounts.

Franken would make it an unfair practice under federal law for private firms to use arrest warrants in debt collections, according to a summary of his proposed bill. Consumers would have the right to sue collectors over the practice. Franken said the bill won't limit judges' authority to issue arrest warrants against debtors who can pay, but don't show up in court when a creditor sues.

"That should come from the court, not the debt collector," said Franken, who asserted that the collections industry relies too much on public resources, such as sheriffs' offices, to collect private debts.

His legislation also would require collectors to furnish consumers with more information about what they owe, including a breakdown of fees and interest, and notify people of what rights they have.

When a consumer challenges a debt -- for example, if someone believes a bill was paid -- collectors would be required to verify the money still is owed, according to the bill summary. This has been a complaint against the booming industry that buys old debts and tries to collect them, working with skimpy information in purchased databases of debtors.

Enforcement by lawsuit

Like the 1977 Fair Debt Collection Practices Act, which Franken's bill would update and expand, enforcement would largely be left to consumers and private attorneys through civil lawsuits. The bill would increase the penalties, add triple damages for willful violations and allow judges to issue injunctions to stop continued wrongdoing. The bill doesn't boost the Federal Trade Commission's budget or staff, Franken said.

Private lawsuits over debt collection tactics have soared in the past decade as the collections industry has grown and as its tactics have become more aggressive, consumer debt has hit record levels and a deep recession has left more people struggling to make payments.

One possible effect of the bill is that litigation over debt collection tactics will continue to increase. Franken said he believes his bill will "clarify what is acceptable and what is legal and isn't." He said he hopes it will reduce collector abuses -- and the resulting litigation.

Pete Barry, a Minneapolis attorney who has been suing debt collectors on behalf of consumers for nearly 14 years, said he generally supports what Franken is proposing, but doubts collectors will change tactics and get sued less often. "I don't know if they have gotten the message" since the federal law took effect in 1978, Barry said. "I don't know if another 32 years will get the message across."

Mark Schiffman, spokesman for ACA International, the collections industry trade group, said it has had discussions with the senator's staff but had not seen the details of his proposed bill. He said that the ACA believes the 1977 law "should be reformed" and that it intends to offer proposals to preserve a vital industry while also protecting consumers.

"We look forward to talking to the senator's office and others to really find some solutions," Schiffman said.

Franken said he is still talking to a Republican senator, whom he didn't identify, in the hope of introducing the bill with bipartisan sponsorship. He said that after reading the Star Tribune reports on debt collector abuses, he and his staff began looking into the problem, speaking to interest groups and people who had been subject to the tactics.

Franken's staff said a wide range of consumer groups, including the National Consumer Law Center and Consumers Union, have backed the bill. Those groups could not be reached Sunday.

David Shaffer • 612-673-7090

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