From TPMmuckraker to the U.S. Senate. Kind of.
Remember our story from last month about how a Bank of America estates rep tried to guilt-trip the son of a deceased card-holder into paying his mother’s credit-card balance, though he was under no obligation to do so?
Well, as we noted last week, the New York Times seemed to like it — following up with their own report on debt collecting firms that contract with the credit card companies to go after the relatives of deceased card-holders, many of whom don’t understand that they’re usually not obligated to pay the debt.
And now, according to a press release, Sen. Chuck Schumer (D-NY) has called on the Federal Trade Commission to investigate the “deceitful practice that preys on relatives who have no legal obligation to pay their deceased loved ones’ bills.”
The release says Schumer’s call “came on the heels of a high-profile published report last week exposing this practice,” — a reference to the Times story, which appeared to be triggered, in turn, by our own story.
According to Schumer, the practice may already be illegal under existing law, since the Fair Debt Collection Practices Act “prevents the collection companies from contacting anyone other than the debtor about outstanding bills”.
He suggests that, at the least, debt collectors should be required to tell the relatives that they aren’t legally obligated to pay the debt at issue.
That seems like the least that could be done.
Schumer’s full letter to the FTC follows after the jump …
March 11, 2009
Chairman Jon Leibowitz
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Dear Chairman Leibowitz:
I am dismayed to learn from recent media reports that some debt collection companies have made it a practice to attempt to collect unpaid credit card balances - and perhaps other types of unsecured debts - from the families of the deceased. According to numerous reports, these companies call surviving relatives, often shortly after the death of a loved one, to coax or cajole them into making payments on the deceased relative’s credit card. To say the least, this practice is distasteful and unethical. Moreover, this practice may very well violate the Fair Debt Collection Practices Act. I am hereby requesting that the Federal Trade Commission investigate whether debt collection companies are violating the law when they engage in this practice, and exactly what information they are conveying to surviving relatives who are under no obligation to pay off their loved ones’ credit cards.
The Fair Debt Collection Practices Act, among its many prohibitions, prevents debt collectors from contacting anyone other than the credit card holder without the prior consent of the holder. Specifically, the Act provides that “a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.” “Consumer” is defined in the Act as a “natural person” who owes a debt. If this language does not apply to a situation in which the consumer is deceased, I would like to know the basis for such an opinion.
I find it shocking that a debt collection company would determine that it is worth causing profound anguish and embarrassment in order to collect debts that are sometimes as low as $50, or which result in a payment of $15 a month from a widow or widower who is struggling to make ends meet. If a debt is large enough to be worth collecting, there are legal ways to obtain payment. First, if a surviving family member has also signed for the card, that family member will be obligated to pay the debt. Second, an unsecured creditor such as a credit card issuer can obtain payment from the estate of the deceased through a routine probate proceeding, after the holders of secured debt - such as mortgagors- are paid. This practice of harassing living family members for upfront payments results in putting credit card issuers in the front of the line to get money from an estate, rather than after those who hold secured debt.
Given the current economic situation, in which millions of honest, hard-working Americans are struggling to meet their obligations, this practice is opportunistic and destructive.
In addition to opening an investigation into these practices, I would like the answers to the following questions:
· Which debt collection companies (“collectors”) are engaging in the practice of collecting credit card debt from widows, widowers, children, and other relatives of the deceased?
· Which credit card issuers are hiring these collectors, or selling their debts to these collectors? Have the issuers endorsed this practice, either by turning a blind eye toward it or by specifically encouraging it?
· Does the practice of trying to collect unsecured debts from the living relatives of debtors who have passed on violate the Fair Debt Collection Practices Act’s prohibition on communicating with third parties? If not, why not? What measures could be taken to make sure that these practices are stopped?
. If these practices are currently legal, are these collectors uniformly making sure that they tell living relatives that they have no legal obligation to pay the debt? Further, are the collectors informing the living relatives of the statute of limitations for collecting these debts? Are the collectors informing the living relatives that any credit card debt would be paid from the estate only after other secured debts, such as mortgage and car payments, are paid?
Given that the FTC receives more complaints about debt collection companies than any other American business, I hope and expect that you will be thorough in your investigation of this matter.
Charles E. Schumer
United States Senator