(NewsNation) — American households owe a record $18.4 trillion, and federal data shows complaints about aggressive debt collection have surged over the past year.
The Federal Trade Commission logged over 140,000 consumer complaints about debt collection in the second quarter — a 220% jump from the same period a year earlier. Georgia, Texas and Florida recorded the highest rates.
Nearly 60,000 of those reports involved debts that weren’t owed or abusive collection practices — more than triple the number from a year earlier.
One reason for the rise: More Americans have fallen behind on payments. The delinquency rate on consumer loans was 2.8% in the second quarter, near the highest level since 2012.
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Credit card balances have climbed to $1.1 trillion, with the average debt per borrower at $6,473, according to TransUnion.
“As cost of living, consumer debt, and delinquencies increase, legitimate debt collection efforts rise, and agents are often financially incentivized to collect,” said Thomas Nitzsche, a financial educator at Money Management International, a credit counseling nonprofit.
But hard times aren’t the only factor — and not all collection efforts are real.
Nitzsche said the jump likely also reflects “a surge in nefarious activity,” as scammers exploit economic stress and new technology.
The FTC has shut down several phantom debt collection schemes in recent years — scams that tricked consumers into paying debts they didn’t owe. In one case, victims were falsely told they were about to be sued or have their wages garnished, resulting in millions of dollars in losses.
Weaker government oversight, stemming from the Trump administration’s cutbacks of the Consumer Financial Protection Bureau, could also be emboldening aggressive tactics of third-party collectors, Nitzsche noted.
Consumer advocacy groups like the Consumer Federation of America and the National Consumer Law Center have also raised concerns about the state of the CFPB, particularly in the area of debt collection.
What else is driving the uptick in debt collection complaints?
Industry representatives offer a different explanation.
ACA International, a trade association that represents debt collection agencies, said the recent rise partly reflects greater consumer awareness of reporting options as well as an uptick in “AI-generated, duplicative complaints.”
The group also pointed to dubious social media advice that it says has driven some to report “embellished” or “false” information.
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“Many consumers are misled by ‘finfluencers’ into believing that it is more beneficial to first contact a federal agency, rather than have a conversation that could more quickly and efficiently resolve any issues,” ACA International said in a statement.
ACA noted that not all reports tracked by the FTC are true “complaints” and said what is often being logged is actually an inquiry, like a question about whether insurance should cover a debt.
Still, the trade group said its members take all complaints seriously and encouraged borrowers to communicate with collectors about the best ways to resolve a debt.
What to know if a debt collector contacts you
Debt collection generates more fraud reports to the FTC than any other industry, according to the agency. But even legitimate collectors must follow strict rules.
The Fair Debt Collection Practices Act makes it illegal for collectors to use abusive, unfair, or deceptive practices.
The law also limits how and when a debt collector can contact you. For example, debt collectors:
can’t contact before 8 a.m. or after 9 p.m., unless you agree to it
can’t contact you at work if you say you’re not allowed to get calls there
can’t contact you by email or text message if you ask them to stop
can’t call you more than seven times within seven days or within seven days after talking with you by phone about a particular debt
can’t privately message you on social media if you ask them to stop
Is credit card debt settlement a good idea?
Nitzsche said it’s also crucial to know state-specific rules, especially statutes of limitations.
Debt collectors only have a limited window to sue to collect on a debt, which typically starts when you miss a payment, according to the FTC. Once that period ends, the debt is considered “time-barred.” However, the time frame depends on both the type of debt and state law.
For those struggling with debt, nonprofit credit counseling agencies like Money Management International can help with debt management plans, credit counseling and education. Those groups are different than for-profit debt settlement companies whose strategies can hurt your credit score.
To confirm that an agency is legitimate, ensure it is certified by the National Foundation for Credit Counseling.
