A new report published jointly by Consumers Union (the publisher of Consumer Reports) and the East Bay Community Law Center of UC Berkeley’s Boalt Hall School of Law confirms that abuses of consumers by debt collectors are on the rise.
As more debt is bought and sold, debt buyers are suing in increasing numbers, often with no proof to support their claims, according to the report, which is titled Past Due: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now.
Debt buying is a massive (and largely unregulated) industry. The report presents some interesting statistics:
- Encore Capital Group, the largest publicly traded debt buyer in the country by asset size, filed 245,000 lawsuits in 2009; half of Encore’s $487.8 million in gross collections came from legal actions – a 22.4% increase in revenue from the previous year.
- Between 2001 and 2006, debt buyer revenue increased over 700%. One debt buyer, Asta Funding, Inc., paid $8 million, or 3 cents on the dollar, during its 2009-2010 fiscal year for debt portfolios worth a total face value of $269.1 million. Another huge debt buyer mentioned in the report is Asset Acceptance Security Group.
- New York City debt collectors filed approximately 300,000 lawsuits per year during 2006 to 2008.
- The FTC estimates that 95% of consumers do not respond to lawsuits – mostly because they do not get notice.