(news nation) — As of now, U.S. households find themselves burdened with an astonishing $18.4 trillion in debt. According to federal statistics, complaints regarding aggressive debt collection have surged significantly over the past year.
In fact, the Federal Trade Commission reported that in just the second quarter, over 140,000 consumer complaints about debt collection poured in, marking an alarming 220% increase from the previous year. Georgia, Texas, and Florida topped the list with the highest complaint rates.
Of those complaints, approximately 60,000 related to unpaid debts or fraudulent collection attempts—this is more than three times what was reported during the same time last year.
One contributing factor for this rise might be that many Americans are falling behind on payments. The consumer loan delinquency rate is now at 2.8%, the highest it’s been since 2012.
Furthermore, outstanding credit card balances have ballooned to $1.1 trillion, with the average debt per borrower sitting at about $6,473, according to TransUnion.
“As living costs keep rising alongside consumer debt and delinquency rates, legitimate collection efforts also increase. Collection agencies often have financial motives to pursue these debts,” noted Thomas Nitsche, a financial educator at the nonprofit Money Management International.
But not every situation is straightforward; there are instances of deception. Nitsche pointed out that the rise in complaints is also fueled by scammers preying on individuals facing financial challenges, using new technologies.
Some debt collection operations have faced shutdowns due to scams that deceive consumers into paying debts they don’t even owe. Victims are sometimes threatened with lawsuits and wage garnishments, leading to substantial financial losses.
In addition, the weakening of governmental oversight, particularly policies from the Trump administration, might be exacerbating the severe tactics used by third-party collection agencies.
Consumer advocacy organizations like the Consumer Federation of America and the National Consumer Law Center have expressed concerns regarding the overall handling of debt collection by the Consumer Financial Protection Bureau.
What else contributes to the rising debt collection complaints?
On the flip side, industry representatives have their own perspectives. ACA International, a group representing debt collection companies, suggests that part of the recent uptick can be attributed to heightened consumer awareness about reporting options and also an increase in “AI-generated duplicate complaints.”
They also highlighted that misleading advice circulating on social media may result in individuals reporting “false” or inaccurate information.
“Many consumers are being led to believe by ‘finfluencers’ that it’s better to contact a federal agency first, rather than resolving issues directly, which could be much quicker and easier,” stated ACA International in a recent statement.
The ACA reminded that not all records tracked by the FTC are genuine complaints; often they could be inquiries instead, like questioning if insurance covers a particular debt.
Despite this, the organization emphasized that its members do take all complaints seriously and encourage both borrowers and collectors to engage in discussions to find the best resolution.
What you should know if a debt collector reaches out
Debt collection is reported to contribute more fraud cases to the FTC than any other sector. However, even legitimate debt collectors must adhere to specific regulations.
The Fair Debt Collection Practices Act prohibits collectors from engaging in abusive or deceptive practices.
The law also places limits on when and how these collectors can contact you. For instance, they can’t:
- Contact you before 8 a.m. or after 9 p.m. unless you agree
- Contact your workplace if you’re not allowed to take calls there
- Reach out if you’ve requested them to cease contact through email or text
- Call more than seven times within a seven-day period, or in the days following a direct conversation about a specific debt
- Message you privately on social media if you’ve asked them not to
Nitsche emphasized the importance of being aware of state-specific laws, especially regarding statutes of limitations. The FTC notes that debt collectors have a limited time to initiate lawsuits for debt recovery and that the clock typically starts when you miss a payment. Once that window closes, the debt is considered “time-barred,” but this timeframe varies depending on the type of debt and state law.
For anyone swamped by debt, nonprofit credit counseling agencies like Money Management International can help with strategies for managing debt and financial education. Unlike for-profit debt settlement firms, these organizations usually don’t harm your credit score.
If you’re looking into agencies for help, make sure they are accredited through the National Credit Counseling Foundation.
