GAO 

United States Government Accountability Office

Report to Congressional Requesters

CREDIT CARDS 

Fair Debt Collection 

Practices Act Could 

Better Reflect the 

Evolving Debt 

Collection 

Marketplace and Use 

of Technology 

September 2009 

GAO-09-748 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2009

CREDIT CARDS

Fair Debt Collection Practices Act Could Better 

Reflect the Evolving Debt Collection Marketplace and 

Highlights of GAO-09-748, a report to Use of Technology 

congressional requesters 

Approximately 6.6 percent of credit 

cards were 30 or more days past 

due in the first quarter of 2009—the 

highest rate in 18 years. To recover 

delinquent debt, credit card issuers 

may use their own collection 

departments, outside collection 

agencies, collection law firms, or 

sell the debt. 

 

GAO was asked to examine (1) the 

federal and state consumer 

protections and enforcement 

responsibilities related to credit 

card debt collection, (2) the 

processes and practices involved in 

collecting and selling delinquent 

credit card debt, and (3) any issues 

that may exist related to some of 

these processes and practices. To 

address these objectives, GAO 

analyzed documents and 

interviewed representatives from 

six large credit card issuers, six 

third-party debt collection 

agencies, six debt buyers, two law 

firms, federal and state agencies, 

and attorneys and organizations 

representing consumers and 

collectors. 

What GAO Recommends

Congress should consider 

modifying FDCPA to (1) help 

ensure that collectors and buyers 

have adequate information about 

debt transferred and have adequate 

documentation to verify debts, (2) 

reflect technologies that were not 

prevalent when the act was written, 

and (3) provide FTC with 

rulemaking authority. 

The primary federal law governing third-party debt collection is the Fair Debt 

Collection Practices Act (FDCPA), which contains provisions on how 

collectors can communicate with consumers and prohibits collectors from 

using abusive, deceptive, and unfair collection practices. Some states have fair 

debt collection laws that provide protections additional to those of FDCPA. 

The Federal Trade Commission (FTC) is the primary enforcement agency for 

the debt collection industry; it collects consumer complaints, enforces 

violations of relevant laws, and undertakes consumer education efforts. 

Federal depository regulators oversee credit card issuers’ collection practices, 

and various state agencies enforce state fair debt collection laws. 

Collecting and selling delinquent debt involves multiple parties. Credit card 

issuers typically collect on accounts less than 6 months delinquent using 

internal collection departments or “first-party” agencies that collect under the 

issuer’s name, and often hire third-party collection agencies or law firms to 

collect on older accounts. Contracts between issuers and collectors often 

specify the collection policies and practices used. Third-party collection 

agencies rely primarily on telephone calls and postal mail in their operations, 

but often use automated mail systems and other technologies to do so 

efficiently in large volume. Credit card accounts often are sold—and may be 

resold multiple times. Several factors influence the price of these accounts, 

including their age, location, and number of times previously placed for 

collection. 

 

State and federal enforcement actions, anecdotal evidence, and the volume of 

consumer complaints to federal agencies—about such things as excessive 

telephone calls or the addition of unauthorized fees—suggest that problems 

exist with some processes and practices involved in the collection of credit 

card debt, although the prevalence of such problems is not known. One issue 

is that collection agencies and debt buyers often may not have adequate 

information about their accounts—sometimes leading the collector to try to 

collect from the wrong consumer or for the wrong amount—or may not have 

access to billing statements or other documentation needed to verify the debt. 

Further, with the advent of the debt-buying industry, accounts are frequently 

sold and resold, which can make verification more difficult as the owner of 

the debt becomes farther removed from the original creditor. 

Communications technologies that are ubiquitous today, such as mobile 

telephones, e-mail, and voice mail, were not prevalent when FDCPA was 

enacted in 1977. Significant uncertainty exists about how to use these 

technologies in compliance with the statute—for example, a debt collector 

may violate FDCPA if someone other than the debtor overhears a voice mail 

message revealing the debt collection effort. Additionally, FDCPA does not 

provide FTC with rulemaking authority, which has limited the agency’s ability 

to address concerns related to the adequacy of account information, 

collectors’ use of modern technologies, and other issues that arise in an 

evolving marketplace. 

View GAO-09-748 or key components.

For more information, contact Alicia Cackley 

at (202) 512-8678 or CackleyA@gao.gov. 
Page i GAO-09-748 

Contents 

Letter 1

Background 3 

Several Federal and State Laws Govern Fair Debt Collection, and 

Agencies’ Oversight Roles Vary 8 

Delinquent Credit Card Debt May Be Collected Internally, 

Outsourced, or Sold 18 

Certain Issues Exist about Some Debt Collection Practices and 

FDCPA Does Not Address Some Changes That Have Occurred in 

Technology and the Marketplace 30 

Conclusions 50 

Matter for Congressional Consideration 51 

Agency Comments 52 

Appendix I Objectives, Scope, and Methodology 53 

Appendix II Comments from the Federal Deposit Insurance 

Corporation 58 

Appendix III Comments from the Federal Trade Commission 59 

Appendix IV GAO Contact and Staff Acknowledgments 61 

Tables 

Table 1: Six Largest Credit Card Issuers by Outstanding Credit 

Card Loans as of December 31, 2007 4 

Table 2: Estimated Price Ranges for Credit Card Debt, Per Dollar of 

Account Face Value, March 2007 and January 2009 29 

Table 3: Number of Consumer Complaints Received by Federal 

Depository Regulators and FTC, 2004-2008 31 

Figures 

Figure 1: Credit Card Delinquency Rates, 1991–2009 (first quarter) 5 

 Credit Card Debt Collection 
Figure 2: Illustrative Example of the Lifecycle of a Sample 

Delinquent Credit Card Account 19 

Figure 3: How Account Information Is Passed among Debt Buyers 45 

Abbreviations 

FCRA Fair Credit Reporting Act 

FDCPA Fair Debt Collection Practices Act 

FDIC Federal Deposit Insurance Corporation 

Federal Reserve Board of Governors of the Federal Reserve System 

FTC Federal Trade Commission 

FTC Act Federal Trade Commission Act 

NACARA North American Collection Agency Regulatory 

 Association 

NCUA National Credit Union Administration 

OCC Office of the Comptroller of the Currency 

OTS Office of Thrift Supervision 

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Page ii GAO-09-748 Credit Card Debt Collection
Page 1 GAO-09-748 

 

United States Government Accountability Office

Washington, DC 20548 

 

September 21, 2009 

The Honorable Carl Levin 

Chairman 

The Honorable Tom Coburn, M.D. 

Ranking Member 

Permanent Subcommittee on Investigations 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Claire McCaskill 

United States Senate 

Credit card debt has increased dramatically over the past several years 

and Americans had more than $838 billion in outstanding credit card debt 

in 2007, according to industry estimates. With the current economic 

recession, the rate at which consumers are falling behind on credit card 

debt also has increased. According to the Board of Governors of the 

Federal Reserve System (Federal Reserve), approximately 6.6 percent of 

credit cards were 30 or more days past due in the first quarter of 2009—the 

highest delinquency rate in 18 years. To recover delinquent debt, credit 

card issuers use a combination of methods, including use of their own inhouse collection departments, third-party collection agencies, collection 

attorneys, and the sale of debt to a debt buyer. The debt collection 

industry recovers and returns to card issuers and other creditors billions 

of dollars in delinquent debt each year that would otherwise go 

uncollected.1

 These efforts increase the availability of consumer credit and 

reduce its cost. 

Congress enacted the Fair Debt Collection Practices Act (FDCPA)—the 

primary federal legislation governing debt collection—in 1977, but the 

industry has changed considerably since that time. In October 2007, the 

Federal Trade Commission (FTC) held a workshop to learn more about 

the current state of debt collection and examine the adequacy of the 

regulatory framework used to oversee the industry. Recognizing that 

relatively little is known about the debt collection industry and the process 

1

This report uses “debt collection industry” to describe businesses that engage in the 

collection of debt for which the business is not the original creditor. The industry often 

refers to itself as the “accounts receivable management industry,” although that term 

sometimes encompasses the collection practices of original creditors as well. 

 Credit Card Debt Collection 
 

through which credit card debt is recovered, you asked us to examine this 

process as well as other issues. Specifically, this report examines (1) the 

protections provided consumers under federal and state laws related to 

credit card debt collection, and the roles and responsibilities of federal 

and state agencies in enforcing these laws; (2) the processes and practices 

involved in collecting and selling delinquent credit card debt; and (3) any 

issues that may exist related to some of these processes and practices. 

This report focuses on the collection of consumer credit card debt. 

However, because debt collection companies typically also service other 

forms of consumer debt (such as health care or utility), it was not always 

possible to separate processes and data related specifically to credit card 

debt. In addition, this report focuses on the largest credit card issuers—

which represent about 83 percent of outstanding credit card debt—and on 

medium- to large-sized debt collection companies. As a result, the 

collection processes and practices described in this report may not be 

representative of smaller credit card issuers or debt collection companies. 

To address our first objective, we reviewed relevant federal laws, rules, 

and guidance and we interviewed staff from FTC and the federal 

depository institution regulators—the Federal Deposit Insurance 

Corporation (FDIC), Federal Reserve, Office of the Comptroller of the 

Currency (OCC), and Office of Thrift Supervision (OTS). We also reviewed 

selected state laws applicable to credit card debt collection, as well as two 

compendiums of state laws. We relied on the appropriate state officials for 

analysis of and information about the meaning and scope of state debt 

collection laws. To address our second objective, we met with officials of 

the six largest credit card issuers, six third-party debt collection 

companies, six companies that purchase credit card debt, two law firms, 

and industry trade groups representing these entities. We chose the 

companies we interviewed because their collection business included 

collection of credit card debt and because they ranged in size from 

medium to very large. These companies included some of the largest 

industry players, although data are not available on the share of the 

respective markets that they represent. We also collected and analyzed 

various documents from these entities, including public filings and sample 

contracts. We also toured the collection facilities of one card issuer and 

one debt collection company and observed telephone collection 

operations. To address our third objective, we reviewed FTC’s annual 

reports on FDCPA from 1998 to 2009, the report and public comments 

deriving from FTC’s 2007 workshop, and documents related to the 

agency’s enforcement actions. We reviewed federal depository regulators’ 

examination manuals, as well as formal and informal enforcement activity 

the regulators took from 1998 to 2008. We also reviewed enforcement 

Page 2 GAO-09-748 Credit Card Debt Collection
 

actions taken by selected state agencies related to debt collection from 

January 2006 to May 2009. We analyzed all of the consumer complaint data 

from the depository regulators and FTC from 2004 to 2008. In addition, we 

reviewed various studies and reports produced by advocacy and trade 

organizations representing the interests of consumers and debt collection 

firms. We conducted interviews with representatives of relevant federal 

and state agencies and consumer and industry trade groups. 

We conducted this performance audit from July 2008 to September 2009 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. More information on our scope and 

methodology is available in appendix I. 

Credit card usage has grown dramatically in recent years. From 1993 to 

2007, the amount charged to U.S. credit cards rose from $475 billion to 

more than $1.9 trillion, according to estimates from the Card Industry 

Directory.2

 While more than 6,000 depository institutions issue credit 

cards, the majority of accounts are concentrated among a small number of 

large banks. As shown in table 1, at the end of 2007, the top six credit card 

issuers accounted for about 83 percent of the outstanding credit card 

loans nationwide. 

Background 

 

2

Includes both consumer and commercial credit card charge volume. See Card Industry 

Directory: The Blue Book of the Credit and Debit Card Industry in North America, 20th 

ed. (Chicago, Ill., 2008). SourceMedia, the publisher of the Card Industry Directory, told us 

that the 20th edition is the last edition that will be published and that its information has 

migrated into a Web-based product called PaymentsSource. 

Page 3 GAO-09-748 Credit Card Debt Collection
 

Table 1: Six Largest Credit Card Issuers by Outstanding Credit Card Loans as of 

December 31, 2007 

Card issuer Outstanding loans 

Percentage of 

total market

Citigroup Inc. $196,811,000,000 23.5

Bank of America 183,691,119,000 22.0

JPMorgan Chase & Co. 148,391,000,000 17.7

Capital One Financial Corp. 62,432,633,000 7.5

Discover Financial Services Inc. 52,302,410,000 6.3

American Express 49,251,563,000 5.9

Total $692,879,725,000 82.9

Source: GAO analysis of data from Card Industry Directory. 

In 2008, issuers had more than $23 billion in nonsecuritized debt that was 

from 30 to 180 days delinquent, according to data from Call Reports.3

 As 

seen in figure 1, credit card delinquency rates have fluctuated over time. 

According to Federal Reserve data, these rates averaged about 4.4 percent 

from 1991 to 2007, but since that time have risen sharply to about 6.6 

percent in the first quarter of 2009. 

 

3

FDIC-insured institutions file financial data quarterly reports, often known as “Call 

Reports” for banks and “Thrift Financial Reports” for thrift institutions, which provide 

details on income and certain financial condition information. However, these reports do 

not include detailed information on credit card balances that an institution may have sold 

to other investors through a securitization—the sale of credit card receivables as part of 

pools of securitized assets to investors. Credit card-issuing banks generally securitize more 

than 50 percent of their credit card balances. 

Page 4 GAO-09-748 Credit Card Debt Collection
 

Figure 1: Credit Card Delinquency Rates, 1991–2009 (first quarter) 

0

1

2

3

4

5

6

7

2009

(Q1)

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Percentage

Source: GAO analysis of Federal Reserve data.

Year

Note: Delinquent loans are those past due 30 days or more and still accruing interest, as well as 

those in nonaccrual status. 

When consumers fall more than 180 days behind on paying their credit 

card bills, banks “charge off” the delinquent account.4

 Charged-off loans 

are generally considered uncollectible—usually because of cardholder 

bankruptcy, death, or prolonged delinquency—and are removed from 

issuers’ portfolios.5

 Federal Reserve data show that in the first quarter of 

2008, issuers charged off $4.2 billion, which represented about 4.7 percent 

of their outstanding credit card debt. By contrast, in the first quarter of 

 

4

Bank regulatory accounting requirements state that the accounts must be charged off after 

180 days of delinquency for an open-end (revolving) account or 120 days for a closed-end 

(installment) account. Uniform Retail Credit Classification and Account Management 

Policy, 65 Fed. Reg. 36903 (June 12, 2000). 

5

Fraudulent charges must be charged off within 90 days of discovery, or within the time 

frames generally established in the Uniform Retail Credit Classification and Account 

Management Policy. Id. at 36905. 

Page 5 GAO-09-748 Credit Card Debt Collection
 

2009, the amount charged off had increased to about $7.5 billion, which 

represented a charge-off rate of 7.6 percent.6

The debt collection industry comprises a variety of participants, including 

companies that specialize in the collection of debt, debt collection law 

firms, and debt buyers, which purchase delinquent debt for a fraction of its 

face value. These companies handle credit card debt as well as other 

forms of debt, including utility, health care, telecommunication, and 

automobile loans, as well as delinquent taxes. According to the U.S. 

Census Bureau, in 2006 more than 4,400 debt collection companies in the 

United States collectively employed approximately 143,000 people. Many 

of these companies were very small—43 percent employed 4 or fewer 

employees, while about 3 percent had 500 employees or more.7

 The small 

agencies may operate within a limited geographic range, while the largest 

corporations may operate in every state and internationally. The debt 

collection industry has experienced consolidation in recent years, largely 

due to mergers and acquisitions. The four largest debt collection 

companies represented about 10 percent of total industry revenues in 1992 

and 19 percent of total industry revenues in 2002, the most recent year the 

Census Bureau collected this statistic. 

Because most debt collection companies are privately held, limited data 

exist on the debt collection industry’s precise size and other attributes. 

However, several sources, including FTC and some industry participants 

and analysts, state that the industry has grown in recent years. Kaulkin 

Ginsberg, a firm that provides research and other services to the debt 

collection industry, estimated that in 2006, revenues were about $10 billion 

for third-party collection agencies and about $1.2 billion for law firms 

specializing in debt collection.8

 ACA International, a credit and collection 

industry trade association, commissioned an industry survey that 

 

6

The Federal Reserve measures charge-off rates as the value of loans removed from the 

books and charged against loss reserves net of recoveries as a percentage of average loans 

and annualized. 

7

U.S. Census Bureau, “Statistics of U.S. Businesses: 2006: NAICS 56144 - Collection 

Agencies.” 

8

Representatives of Kaulkin Ginsberg told us they developed their estimates from 

discussions with industry participants as well as from financial statements and other data 

obtained in the firm’s capacity as an industry advisor. We could not assess the reliability of 

Kaulkin Ginsberg’s estimates, and our review of its largely qualitative and unstandardized 

methodology indicates that the potential for error may be large in its estimates about the 

overall industry. 

Page 6 GAO-09-748 Credit Card Debt Collection
 

estimated that in 2007 collection agencies recovered about $58 billion in 

delinquent debts, although these estimates may not have been very 

accurate.9

One significant change in the debt collection business in recent years has 

been the growth of debt buying. Debt buyers include firms whose business 

model focuses on the purchase of debt, as well as collection agencies and 

collection law firms who collect both on debt owned by others as well as 

debt they purchase and own themselves. In addition, some firms are 

passive debt buyers—investors that buy and resell portfolios but do not 

engage in actual debt collection themselves. While little comprehensive 

data exist on the debt-buying industry, Kaulkin Ginsberg estimated that 

the amount of debt purchased grew from about $57 billion in 2003 to $100 

billion in 2006, with credit card debt representing about 75 percent of the 

2006 total. In May 2006, an industry trade journal, Collections and Credit 

Risk, stated that the global debt-buying market had sales of an estimated 

$158 billion annually and that $100 billion of credit card debt is sold 

annually in the United States alone.10

While the exact number is not known, hundreds, and possibly thousands, 

of entities purchase debt, according to DBA International, a trade 

association for debt buyers. The debt-buying industry is highly 

concentrated, and according to The Nilson Report—which provides news 

and conducts research on consumer payment systems—10 buyers were 

responsible for 81 percent of all of the credit card debt purchased in fiscal 

year 2007.11 Only five debt-buying firms are known to be publicly traded 

companies, and our review of these firms’ filings with the Securities and 

Exchange Commission found that four of them report purchasing credit 

card debt. Portfolio Recovery Associates, Inc., reported it had purchased 

more than $32 billion, face value, of credit card debt from 1996 to 2008, 

representing 82 percent of its overall debt portfolio. Asset Acceptance 

Capital Corp. had purchased more than $22 billion in credit card debt from 

 

9

PricewaterhouseCoopers, LLP, The Value of Third-Party Debt Collection to the U.S. 

Economy in 2007: Survey and Analysis, June 12, 2008, study commissioned by ACA 

International. While the methodology of this survey was generally sound, because of the 

low response rate and the absence of nonresponse bias analysis, and the wide confidence 

intervals around key estimates due to the small number of responses, the resulting survey 

data may not be reliable for making precise quantitative estimates. 

10Figures represent face value of debt sold. 

11The Nilson Report, Issue 901, April 2008. 

Page 7 GAO-09-748 Credit Card Debt Collection
 

1999 to 2008, representing 64 percent of the face value of its debt portfolio. 

In addition, Encore Capital Group reported it purchased more than $201 

million in credit card debt in 2008. A fourth company, Asta Funding, 

indicated it purchased credit card debt, but did not specify the amount. 

A variety of federal and state laws address debt collection practices, and a 

number of federal and state agencies play a role in overseeing the debt 

collection industry, conducting enforcement activities, and educating 

consumers about debt collection. 

Several Federal and 

State Laws Govern 

Fair Debt Collection, 

and Agencies’ 

Oversight Roles Vary 

FDCPA Is the Primary 

Federal Law Governing 

Third-party Debt 

Collection Practices 

Congress has passed several laws that govern the practices of creditors or 

third parties in the collection of debt, including FDCPA, the Federal Trade 

Commission Act (FTC Act), and the Fair Credit Reporting Act (FCRA). 

The primary federal law governing third-party debt collection practices is 

FDCPA, which Congress enacted in 1977 in response to concerns about 

the practices of many debt collectors.12 FDCPA applies to third-party debt 

collectors, a term that includes collection agencies that operate on a 

contingency basis, collection law firms, and debt buyers, but generally 

does not apply to original creditors collecting on their own debt.13

According to the Senate report accompanying FDCPA, creditors were 

exempted because it was believed that their incentive to protect ongoing 

customer relationships made them less likely to engage in abusive 

collection practices.14

Fair Debt Collection Practices 

Act 

FDCPA prohibits debt collectors from using abusive, deceptive, and unfair 

debt collection practices as well as other specific practices: 

 

12Pub. L. No. 90-321, title VIII, as added Pub. L. No. 95-109, 91 Stat. 874, codified at 15 U.S.C. 

§§ 1692 – 1692p. 

13FDCPA does apply to original creditors in cases where a creditor collects its own debts 

using a different name that would indicate a third party is collecting its debt. 

14S. Rep. No. 95-382, at 2 (1977). 

Page 8 GAO-09-748 Credit Card Debt Collection
 

• Communications. The act regulates how collectors can communicate 

with consumers who may owe a debt and with others associated with the 

consumer. For example, it prohibits a collector from informing a 

consumer’s employer about the debt and prohibits collectors from calling 

before 8:00 a.m. or after 9:00 p.m. Consumers also may request that the 

collector cease further communication. 

• Treatment of debtor. Debt collectors may not harass, oppress, or abuse 

consumers; use or threaten violence; use obscene language; or use a 

telephone to engage in actions intended to annoy, such as causing the 

telephone to ring repeatedly. 

• False or misleading representations. Debt collectors may not 

misrepresent who they are, falsely represent the legal status of the debt, 

fail to disclose to the consumer that they are attempting to collect a debt, 

or imply that nonpayment is a crime. 

• Unfair practices. The act prohibits the use of unconscionable or unfair 

practices, including trying to collect the wrong amount of debt; adding 

unauthorized fees, interest or other charges to the debt; or causing the 

consumer to incur collect-call telephone charges. 

FDCPA also dictates the process debt collectors must use during the initial 

communication with the consumer and the steps a consumer can take to 

dispute a debt. Within 5 days of a collector’s initial communication about a 

debt, the collector must send the consumer a written notice—a validation 

notice—that includes the amount of the debt, the name of the owner of the 

debt, and a statement informing the consumer that the debt is assumed 

valid unless the consumer disputes the debt in writing within 30 days. If 

the consumer disputes the debt within that period, the collector must 

cease collection efforts until the collector provides the consumer with 

verification of the debt. 

FTC has primary government enforcement authority under FDCPA—

except to the extent that this enforcement authority is given to seven other 

federal agencies for entities under their jurisdiction.15 FTC has a number of 

 

1515 U.S.C. § 1692l(b). These agencies are FDIC, Federal Reserve, OCC, OTS, the National 

Credit Union Administration, the Department of Transportation, and the Department of 

Agriculture. These seven agencies are authorized to enforce FDCPA under their authorities: 

section 8 of the Federal Deposit Insurance Act for the federal depository regulators and the 

Federal Credit Union Act for the National Credit Union Administration. 12 U.S.C. §1818; 12 

U.S.C. § 1751 et seq. 

Page 9 GAO-09-748 Credit Card Debt Collection
 

enforcement options for those who violate FDCPA. FTC can seek a court 

order prohibiting defendants from engaging in conduct and requiring that 

they pay monetary relief, including restitution to consumers, disgorgement 

of ill-gotten gains, and civil penalties of $16,000 per violation.16 FDCPA 

also provides consumers with a private right of action—allowing them to 

bring civil actions and be awarded monetary damages if collectors enga

in prohibited collection practices or otherwise do not adhere to the act

requirements. 

ge 

’s 

 

The FTC Act, enacted in 1914 and amended on numerous occasions, gives 

FTC the authority to prohibit and take action against unfair or deceptive 

acts or practices.17 Certain practices that violate FDCPA provisions may 

also violate section 5 of the FTC Act, and FTC often will bring 

enforcement actions under both statutes in its cases against third-party 

debt collectors. In addition, FTC and federal depository regulators can use 

the FTC Act to address unfair or deceptive debt collection practices by 

original creditors, who are not covered by FDCPA.18 The FTC Act also 

authorizes FTC to obtain a court-ordered injunction to halt the activities of 

any entity that it believes is violating the laws it enforces, including 

FDCPA.19

Federal Trade Commission Act 

FCRA, enacted in 1970, is designed to ensure the accuracy of information 

provided for “consumer reports”—reports containing information about an 

individual’s personal and credit characteristics used to help determine 

eligibility for such things as credit, insurance, and employment.20

Consumer reporting agencies assemble consumer reports using 

information provided by data furnishers that can include credit card 

issuers, debt collectors, and debt buyers. FCRA requires that these data 

furnishers provide accurate information to consumer reporting agencies 

and specifies that information about delinquent accounts generally cannot 

Fair Credit Reporting Act 

16Disgorgement is having to give up profits or other gains illegally obtained. 15 U.S.C. § 

45(m)(1)(a); 16 C.F.R. § 1.98(d). 

17Pub. L. No. 63-203, ch. 311, 38 Stat. 717 (1914), codified at 15 U.S.C. §§ 41 – 58. 

18Federal depository institution regulators, but not FTC, have authority to enforce the FTC 

Act against depository institutions. 15 U.S.C. §§ 45(a)(2), 57a(f). 

1915 U.S.C. § 53(b). 

20Pub. L. No. 90-321, title VI, as added Pub. L. No. 91-508, title VI, § 601, 84 Stat. 1128 (1970), 

codified at 15 U.S.C. §§ 1681 – 1681x. 

Page 10 GAO-09-748 Credit Card Debt Collection
 

remain on a consumer’s credit report more than 7 years.21 The act also 

prescribes how the date of delinquency of a consumer debt is to be 

calculated, as well as the process that consumer reporting agencies and 

data furnishers must follow when consumers dispute the accuracy of 

information on credit reports. In July 2009, FTC and the federal depository 

institution regulators issued a final rule to establish guidelines for 

reasonably ensuring the accuracy and integrity of consumer information 

reported to consumer reporting agencies and adding a new process for 

addressing consumer disputes.22

Provisions in other federal statutes also affect debt collection practices. 

The Telephone Consumer Protection Act of 1991 regulates the use of 

predictive dialers—a technology on which the debt collection industry 

relies heavily in its collections operations.23 Subtitle A of title V of the 

Gramm-Leach-Bliley Act governs the collection, sharing, and safeguarding 

of consumers’ nonpublic personal information by certain financial 

institutions, including creditors and debt collectors, and requires that 

these entities implement proper safeguards to protect the security and 

integrity of consumer information.24

Other Federal Statutes 

In addition, a number of financial regulatory statutes grant federal 

depository regulators the authority to examine banks’ safety and 

soundness, as well as compliance with applicable laws and regulations. As 

part of these examinations, the federal depository regulators may review 

credit card issuers’ internal debt collection practices and their oversight of 

third-party debt collectors (vendors), in connection with applicable laws, 

regulations, or guidance. 

 

2115 U.S.C. §§ 1681c; 1681s-2(a). 

22Procedures to Enhance the Accuracy and Integrity of Information Furnished to Consumer 

Reporting Agencies Under Section 312 of the Fair and Accurate Credit Transactions Act, 74 

Fed. Reg. 31484 (July 1, 2009), to be codified at 12 C.F.R. pts. 41 (OCC), 222 (Federal 

Reserve), 334 (FDIC), 571 (OTS), 717 (NCUA), and 16 C.F.R. pt. 660 (FTC). The effective 

date for these final rules and guidelines is July 1, 2010. 

2347 U.S.C. § 227. Predictive dialers are automated computer systems that determine the 

number of calls to make based on the time of day, the number of call-center staff logged 

onto the system, and the average length of time staff speak with consumers. 

2415 U.S.C. §§ 6801-6809. 

Page 11 GAO-09-748 Credit Card Debt Collection
 

States cannot enforce FDCPA, but according to the National Consumer 

Law Center, most states have fair debt collection statutes of their own.25

According to state officials we spoke with, many of the state laws largely 

mirror FDCPA but allow for local enforcement—however, some state laws 

are more expansive than FDCPA because they define “debt collector” 

more broadly or place additional requirements on debt collectors’ 

conduct. Examples among four states we reviewed include the following: 

Many States Have Their 

Own Fair Debt Collection 

Statutes 

• Applicability to creditors. Some state debt collection statutes may 

regulate the activities of creditors collecting their own debts, unlike 

FDCPA, which generally applies only to third-party collectors.26 For 

example, California law expressly defines debt collector to mean “any 

person who, in the ordinary course of business, regularly, on behalf of 

himself or herself or others, engages in debt collection.”27

• Consumer notice requirements. Some states may have consumer notice 

requirements additional to those in FDCPA. For example, California’s debt 

collection statute among other things expressly requires third-party debt 

collectors to provide a specific notice to a debtor describing the debtor’s 

rights, including notice that collectors may not harass the debtor by using 

threats of violence or arrest or by using obscene language.28 The Colorado 

Fair Debt Collection Practices Act expressly requires collectors to provide 

consumers with the Web site address of the Colorado Attorney General, 

which contains information on the act.29

• Restrictions on debt collection activities. Some states may place 

restrictions on collection activities additional to the restrictions in FDCPA. 

For example, Massachusetts debt collection regulations state that it is an 

 

25Robert J. Hobbs et. al. National Consumer Law Center, Fair Debt Collection, App. E , p. 

731 (6th ed., 2008). FDCPA does not preempt state law as long as the state law is not 

inconsistent with the federal law. Explicitly, state law is not inconsistent if it provides 

protections greater than those of FDCPA. 15 U.S.C. § 1692n. 

26As noted above, FDCPA does apply to a creditor collecting its own debt if the creditor 

uses a different name that would indicate a third party is collecting its debt. 15 U.S.C. § 

1692a(6). 

27Cal. Civ. Code § 1788.2(c) (2009), which provides further that, “[t]he term includes any 

person who composes and sells, or offers to compose and sell, forms, letters, and other 

collection media used or intended to be used for debt collection, but does not include 

attorney or counselor at law.” 

28Cal. Civ. Code § 1812.700(a) (2009). 

29Colo. Rev. Stat. § 12-14-105(3)(c) (2009). 

Page 12 GAO-09-748 Credit Card Debt Collection
 

unfair or deceptive act or practice for a creditor or debt collector to call a 

consumer’s home more than twice a week per debt or call locations other 

than home more than twice in 30 days.30

• Private civil enforcement. As with FDCPA, some states may allow 

consumers to bring civil law suits against debt collectors that violate state 

debt collection laws. According to one state official, such a private right of 

action is designed to encourage compliance with the law while minimizing 

the use of limited state enforcement resources. For example, Texas law 

expressly provides that consumers can also be granted injunctive relief 

that prevents a collector from continuing the unlawful harmful conduct.31

Debt collection also is affected by applicable state statutes of limitations, 

which place limits on when an issuer or debt collector can initiate legal 

action against a consumer for collection of a debt. According to FTC, the 

statute of limitations for credit card debt varies by state, but typically 

ranges from 3 to 10 years, and generally begins to run from the date the 

debt becomes delinquent. Some states may allow the statute of limitations 

to restart under certain circumstances—for example, in Kansas, the 

statute of limitations is restarted when a consumer makes a payment 

toward the debt or acknowledges in writing owing the debt.32 According to 

FTC, courts that have addressed the issue have found it illegal to sue or 

threaten to sue to recover debt that is beyond the statute of limitations, 

often referred to as “time-barred debt.” According to the National 

Consumer Law Center, courts have generally found that attempting to 

collect a time-barred debt without suing or threatening to sue does not 

violate FDCPA, except in the few states in which debts are extinguished at 

the end of the limitations period.33

 

30Mass. Regs. Code tit. 940, § 7.05(3)(d) (2009). 

31Tex. Finance Code § 392.403(a)(1) (2009). 

32Kansas law explicitly states that an action may be brought within the statutory period 

after a payment on, or a signed written acknowledgment of, or promise to pay the debt is 

made by the debtor when a consumer makes a payment toward the debt or acknowledges 

in writing owing the debt. Kan. Stat. Ann. § 60-520(a) (2008). 

33See for example Wis. Stat. § 893.05 (2008), which states “[w]hen the period within which 

an action may be commenced on a Wisconsin cause of action has expired, the right is 

extinguished as well as the remedy.” Robert J. Hobbs et. al. National Consumer Law 

Center, Fair Debt Collection, p. 222 (6th ed., 2008). 

Page 13 GAO-09-748 Credit Card Debt Collection
 

A number of federal and state agencies regulate the various participants 

involved in debt collection and bring enforcement proceedings against 

violators of the law by filing and prosecuting administrative or civil actions 

and undertaking other consumer protection measures such as consumer 

and industry education. 

FTC has primary government enforcement responsibility to oversee the 

debt collection industry and, in doing so, tracks consumer complaints, 

takes enforcement actions, and provides consumer and industry 

education.34 FTC receives consumer complaints about debt collection and 

other matters online through its Complaint Assistant system or by 

telephone or in writing through its Consumer Response Center and enters 

these complaints into its Consumer Sentinel database. In addition, local 

Better Business Bureaus and state and local law enforcement authorities 

can also enter information into the Consumer Sentinel database regarding 

complaints they receive. Some federal depository regulators are also 

members of Consumer Sentinel and can access the database and review 

complaints related to institutions they oversee. FTC and other law 

enforcement authorities use the Consumer Sentinel database to target 

their investigations and guide their enforcement activities. 

Federal and State Agencies 

Oversee Debt Collection 

Practices in a Variety of 

Ways 

Federal Trade Commission 

FDCPA and the FTC Act provide FTC with enforcement authority to 

investigate debt collection agencies it believes may be violating the law. As 

noted earlier, if FTC’s investigation reveals violations of either act, the 

agency can file suit in federal court for injunctive relief to prevent further 

violations and seek restitution for consumers and disgorgement of illgotten gains by the collector. Alternatively, FTC can seek civil penalties 

and other monetary relief by requesting that the Department of Justice file 

suit against the collector on its behalf. FTC officials told us that the agency 

has focused its enforcement efforts on practices that result in the greatest 

harm to consumers or on cases that involve a particular legal issue it is 

trying to clarify. FTC officials said that to maximize the deterrent effect of 

its enforcement actions, they recently have been demanding greater 

monetary penalties and naming as defendants individual corporate officers 

and managers, rather than simply the company as a whole. 

 

34Section 184 of the proposed Consumer Financial Protection Agency Act of 2009, H.R. 

3126, 111th Cong. § 184, would create a new Consumer Financial Protection Agency, which 

would have primary enforcement authority for FDCPA, among other consumer protection 

laws. The bill was introduced on July 8, 2009, and was referred to the Committee on 

Financial Services and the Committee on Energy and Commerce. 

Page 14 GAO-09-748 Credit Card Debt Collection
 

FTC also undertakes consumer education efforts to inform consumers of 

their rights and the restrictions placed on debt collectors by FDCPA. In 

2008, FTC distributed more than 110,000 English- and Spanish-language 

copies of the brochure “Fair Debt Collection,” which seeks to describe 

FDCPA in plain, easily understood language.35 FTC also issues consumer 

alerts on its Web site on specific debt collection issues of concern. For 

example, the agency issued an alert on the collection of time-barred debts 

shortly after it had taken an enforcement action related to that issue. FTC 

call center staff also seek to educate consumers who call to submit a debt 

collection complaint—for example, informing them of their right to obtain 

written verification of the debt. The agency also seeks to educate and 

reach out to participants in the debt collection industry by speaking at 

industry conferences, participating in panel discussions, and issuing 

FDCPA advisory opinions. 

The major credit card issuers are structured as depository institutions and 

their activities, including those related to debt collection, are therefore 

overseen by federal depository institution regulators. OCC oversees four 

of the largest consumer credit card issuers—Bank of America, Capital 

One, Chase, and Citibank, while FDIC oversees two other large issuers, 

American Express and Discover.36 The Federal Reserve, OTS, and the 

National Credit Union Administration (NCUA) also oversee certain credit 

card issuers.37 The depository regulators conduct examinations to evaluate 

the safety and soundness of their institutions and ensure compliance with 

federal laws and regulations, including the FTC Act and FCRA. While 

FDCPA does not apply directly to credit card issuers collecting on their 

own debts, some of the practices prohibited by the statute, if engaged in 

by financial institutions, may support a claim of unfair or deceptive 

practices in violation of the FTC Act, which is the statute on which the 

federal depository regulators rely in overseeing collection activities.38

Federal Depository Regulators 

 

35FTC updated this brochure in February 2009 and renamed it Debt Collection FAQs: A 

Guide for Consumers. 

36An American Express savings bank that issues credit cards is overseen by OTS. 

37The Federal Reserve also serves as the consolidated supervisor for bank holding 

companies, within which national banks, among certain other types of entities, may be 

housed. 

38FTC lacks jurisdiction under the FTC Act over banks, thrifts, and federal credit unions. 

Page 15 GAO-09-748 Credit Card Debt Collection
 

As part of issuers’ safety and soundness examinations, regulators may 

review the sale of credit card debt, as well as the programs issuers offer 

delinquent consumers to help them pay their debt, since these issues can 

affect the financial stability of the bank. Regulators told us they also 

review issuers’ management and oversight of third-party vendors, 

including third-party debt collection agencies. If they have reason to 

suspect problems with these third-party debt collection relationships, they 

can investigate the collection agency on site at the company workplace.39

If the regulators identify violations related to debt collection, among th

possible responses could be formal enforcement actions (such as cease 

and desist orders, civil money penalties, removal orders, and suspension 

orders) or informal enforcement actions (such as memorandums of 

understanding and board resolutions). In addition, if appropriate, 

regulators can seek restitution as a remedy for violations involving unfair 

or deceptive debt collection practices. Like FTC, the depository regulators 

collect and track complaints from consumers about issuers. They use 

these data to focus their risk-based examinations, assess issuers’ 

compliance with consumer protection laws and regulations, and determine 

the need for future regulations or educational efforts. 

e 

 

Our meetings with state regulators indicated that states vary in how they 

regulate debt collectors and enforce fair debt collection laws. Agencies 

that play a key role in overseeing debt collection can include the state’s 

banking or finance division, office of consumer affairs, and the office of 

the Attorney General. Some states also have collections or licensing 

boards—comprising in some cases both government regulators and 

industry representatives—that serve as the regulatory body for debt 

collection agencies in the state. 

State Agencies 

Certain states require debt collection agencies doing business in the state 

to be licensed. State agency officials noted that some states may require 

debt collectors to pay a licensing fee or post a bond, and some states can 

suspend or revoke an agency’s license if it has been found to violate state 

debt collection laws or otherwise violate licensing requirements. One state 

official also told us that licensing of debt collectors serves to keep debt 

collectors in compliance with state law without having to expend state 

resources bringing collectors to court. For example, in Colorado the 

Attorney General’s office said that in recent years it had brought an 

average of about 50 to 60 administrative enforcement actions a year—

39One regulator told us it has never exercised this authority. 

Page 16 GAO-09-748 Credit Card Debt Collection
 

about half of which resulted in settlements and the other half resulted in 

the issuance of letters of admonition (censures). The office said that one 

or two cases have resulted in the revocation of a collector’s license—but 

only rarely has court action been required. 

Under the auspices of the North American Collection Agency Regulatory 

Association (NACARA), we held a group meeting with agency staff who 

oversee debt collection from 17 states. Many of the states represented 

gather and analyze consumer complaints about debt collection, often 

through telephone hotlines, postal mail, and online forms. States can also 

receive referrals from district attorneys, Better Business Bureaus, and 

other sources. Some states, such as Minnesota and Tennessee, review or 

investigate every consumer complaint received about a debt collector. 

Other states, the regulators told us, look collectively at complaint trends 

or patterns to determine if an investigation or enforcement action may be 

warranted. At least one state, North Dakota, conducts on-site 

examinations of every licensed collection agency operating in the state, 

either through an on-site visit or by mail. North Dakota bases its 

examination cycle primarily on the complaint volume received against a 

licensed collection agency, but examinations are still conducted even if 

there are no complaints received against a particular agency. 

From January 2006 through May 2009, states took approximately 28 

enforcement actions against debt collectors and collection attorneys for 

debt known to involve, or possibly involving, credit cards, according to the 

National Association of Attorneys General. In many of these cases state 

authorities said they imposed civil monetary penalties, recovered 

consumer funds, or enjoined the collector from engaging in further 

unlawful collection activities. Often, consumer complaints may serve as 

the trigger for taking an enforcement action—for example, Minnesota 

state officials told us that approximately 95 percent of such actions 

stemmed from individual consumer complaints. 

As with FTC, a number of state regulators make efforts to educate 

consumers about their rights under federal and state fair debt collection 

laws. Some states that we spoke with have developed Web sites, 

brochures, or videos on public access channels to educate consumers. In 

some states, regulators also deliver speeches and appear at conferences 

related to debt collection. Some states and cities incorporate debt 

collection issues into their broader efforts to improve consumers’ financial 

literacy. For example, New York City’s Department of Consumer Affairs 

addressed many debt collection issues during a weeklong “call-a-thon,” 

from which consumers could get answers to financial questions. 

Page 17 GAO-09-748 Credit Card Debt Collection
 

States also coordinate with federal entities and among themselves. For 

example, to coordinate oversight responsibilities, FTC staff said they 

regularly communicate with state regulators and share information on 

industry trends and concerns. FTC also shares information with state 

Attorneys General and local law enforcement agencies through its 

Consumer Sentinel complaint database. NACARA was created in 1994 to 

help communicate and coordinate debt collection regulatory and 

enforcement efforts among member states. In some instances, several 

states jointly pursued enforcement actions against debt collectors. In 

addition, 12 NACARA member states are in the process of developing a 

uniform debt collector licensing application to improve the consistency of 

information on debt collection agencies across different states. NACARA 

members with whom we spoke said they have a good working relationship 

with FTC and have participated in FTC conferences. 

Large credit card issuers first seek to recover delinquent debt using 

internal collection departments or first-party collection agencies that 

collect debt using the issuer’s name. Issuers offer short- and long-term 

repayment arrangements to assist delinquent debtors. When large issuers 

are unable to collect these accounts, they typically send them to thirdparty collection agencies or collection law firms. But these creditors also 

can sell delinquent debt to a debt-buying firm that may, in turn, seek 

recovery using in-house collection, third-party collection agencies, or 

resale of the debt to another debt-buying firm. Figure 2 provides an 

illustrative example of the lifecycle of one delinquent credit card account. 

Delinquent Credit 

Card Debt May Be 

Collected Internally, 

Outsourced, or Sold 

Page 18 GAO-09-748 Credit Card Debt Collection
 

Figure 2: Illustrative Example of the Lifecycle of a Sample Delinquent Credit Card Account 

Source: GAO.

Delinquent

account

Internal

collections

Third-party

collector

Third-party

collector

Third-party

collector

#2

Debt

buyer

Debt

buyer

#2

Credit card 

issuer uses its

internal collection 

department

operations

Collection efforts

continue until 

collection is

successful, statute 

of limitations runs

out, or owner of debt 

otherwise ceases

collection efforts

Issuer places

account with 

a third-party 

collection 

agency

Issuer tries giving 

account to a

different 

third-party agency

Debt buyer

attempts

collection

Debt buyer #2 places

the account with a

third-party agency

After account 

is charged off

Collection 

effort fails

Issuer sells

the account

Debt buyer sells

the account

Credit Card Issuers 

Maintain Internal 

Collection Operations 

Large credit card issuers maintain internal collection departments that 

attempt to recover money owed on delinquent credit card accounts.40

Typically, these issuers use internal collection departments to contact 

consumers with accounts that are no more than 180 days delinquent and 

thus have not yet been charged off. Officials with whom we spoke at the 

six largest issuers have internal policies and procedures that govern their 

collection practices and audit departments that seek to ensure compliance 

with applicable laws. While FDCPA does not apply to creditors collecting 

on their own accounts, all of these issuers said they voluntarily use 

FDCPA as guidance for their internal collection activities and regularly 

monitor compliance with applicable state laws. Some issuers told us their 

collection staff undergo training programs that range in length from 2 to 10 

weeks and include topics such as the company’s collection policies, 

procedures, and technologies; negotiation skills; and compliance with 

applicable federal and state laws. The collection departments of five of the 

six largest issuers each had from 850 to 8,390 collectors. (The sixth issuer 

declined to provide the number of its collection employees.) The great 

majority of issuers’ internal U.S. collection operations are based in the 

 

40Recovery of debt from debtors who have died or filed for bankruptcy generally involves a 

different legal framework from typical debt collection and is not the focus of this report. 

Page 19 GAO-09-748 Credit Card Debt Collection
 

United States, although one issuer had a call center located in Costa Rica. 

Several of the large issuers we met with have recently expanded the size of 

their collection staff due to increases in the number of delinquent 

accounts; representatives of one issuer told us in February 2009 that its 

collection staff had increased 20 percent since late 2008. 

Issuers can assist delinquent debtors experiencing financial hardship by 

using a short- or long-term payment arrangement to bring the account 

current or offering to settle a cardholder’s account by accepting less than 

the full balance due. Temporary hardship programs can last up to 12 

months and help borrowers overcome financial difficulties, such as 

unemployment or short-term illness, by reducing interest rates, finance 

charges, and fees. Programs of more than 12 months (“work out” 

programs) address longer-term financial hardships, such as divorce, 

permanent disability, or the death of a household income provider. 

Repayment terms for work out programs vary widely among issuers, but 

the federal depository regulators’ guidance for credit card lending states 

that the programs should strive to have borrowers repay their credit card 

debt within 60 months.41 Issuers may choose to “re-age” the account—or 

return a delinquent credit card account to current status without 

collecting the total amount of principal, interest, and fees that are due—if 

it meets certain criteria. Consumers can benefit from the re-aging of 

accounts because it can improve their credit reports. Federal banking 

guidelines exist on the frequency and circumstances under which issuers 

can re-age credit card accounts.42

Issuers Outsource Some 

Collection Activities 

Credit card issuers can outsource debt collection to various types of 

collection firms. Accounts that have not been charged off are generally 

outsourced to first-party collection agencies and charged-off accounts are 

generally outsourced to third-party collection agencies or collection law 

 

41For example, see Board of Governors of the Federal Reserve System Supervisory Letter 

SR 03-1 on Account Management and Loss Allowance Guidance (Jan. 8, 2003). 

42Under federal depository regulators’ guidelines, an account should exhibit certain criteria 

to be eligible for re-aging, such as the borrower having demonstrated a renewed 

willingness and ability to repay the loan, the account has existed for at least 9 months, and 

the borrower has made at least three consecutive minimum monthly payments or the 

equivalent cumulative amount. Issuers may not re-age an account more than once within 

any 12 month period and no more than twice within any 5 year period. Different limits 

apply to accounts that have entered into work out programs. Uniform Retail Credit 

Classification and Account Management Policy. 65 Fed. Reg. 36903, 36905 (June 12, 2000). 

Page 20 GAO-09-748 Credit Card Debt Collection
 

firms. Contracts between issuers and these agencies often specify the 

policies and procedures to be used in the collection process. An issuer can 

also decide to sell credit card debts and the buyer of those debts can, in 

turn, resell those debts to another buyer. Limited available data exist on 

the specific amounts of the credit card debt that issuers collect in-house, 

outsource, or sell because issuers generally consider this to be proprietary 

business information. 

Some credit card issuers use “first-party” collection agencies to 

supplement their in-house collection operations for delinquent accounts 

that have not yet been charged off. First-party collection agencies use the 

name of the issuer when contacting consumers and may not be subject to 

FDCPA. These agencies typically are paid on a fee-for-service rather than 

contingency basis. Using first-party collection agencies gives issuers 

additional flexibility to manage fluctuations in the workload and resources 

of their internal collection operations. Because first-party collectors use 

the issuers’ name and are collecting from current customers, there is an 

emphasis on preserving the relationship with the consumer and mitigating 

the negative perception that consumers can have about their accounts 

being forwarded to collection. Some issuers also mentioned that their firstparty collection agencies are required to adhere to the same standards as 

their internal collection departments. 

First-party Collection Agencies 

If an issuer’s internal efforts to collect on accounts have been 

unsuccessful or the accounts are more than 180 days delinquent and have 

been charged off, the issuer may choose to place the account with a thirdparty agency (also known as a contingency agency). Third-party collection 

agencies are generally paid on commission based on a percentage of the 

amount recovered, with the percentage being higher for debts that are 

older or otherwise harder to collect. Third-party agencies typically use 

their own names when communicating with debtors and are subject to 

FDCPA, as well as any relevant state laws. The length of time that 

accounts are placed with these agencies can vary, but can range from 

several weeks to several months or years. The agencies generally return 

uncollected accounts to the issuer at the end of the placement period, at 

which time issuers sometimes place the account with a different collection 

agency. Some third-party collection agencies focus on recovering credit 

card debt, while other agencies specialize in recovering other types of 

debt, such as telecommunications or health care, although these 

companies may collect credit card debt as well. Officials of one large 

credit card issuer told us it had contracts with 15 to 20 different third-party 

collection agencies, while another issuer had contracts with 20 such 

agencies, and a third issuer with more than 50 agencies. Some of the 

Third-party Collection Agencies 

Page 21 GAO-09-748 Credit Card Debt Collection
 

issuers explained that they choose their collection agencies selectively to 

avoid legal or reputation risks and to maintain customer relationships. For 

example, they may review companies’ records of legal compliance, data 

security practices, and number of Better Business Bureau complaints. 

Before an issuer provides a portfolio of credit card accounts to a thirdparty company for collection, it “scrubs” the portfolio to remove accounts 

for which the debtor has died, filed for bankruptcy, previously settled the 

debt, or disputed its validity, according to several issuers with whom we 

met. Several collection companies told us that when they receive a 

portfolio from an issuer or another collection company, they typically 

conduct a scrub of their own, including checking the accuracy and 

completeness of names, addresses, telephone numbers, and other 

information to ensure the account is valid for collection. Collection 

companies can use customized models to help determine the best 

collection strategy for the portfolio. These models assess the likelihood of 

payment and can help determine payment or settlement terms that the 

debtor should be offered. 

The collection process begins when the collection company initiates 

contact with the debtor either by telephone or in writing. In general, 

FDCPA requires collectors to provide a consumer with notice of their 

rights under the law, called a validation notice, within 5 days of initial 

contact with the debtor, although we spoke with officials from one agency 

that sends the notice almost immediately.43 If a debtor cannot be located, 

companies often use locator methods, such as “skip tracing”—the practice 

of searching national telephone directories, credit reports, tax assessor 

and voter registration records, and other sources, as well as contacting 

employers, friends, and family members of the debtor. Collection 

companies sometimes use the services of third-party vendors that 

specialize in skip tracing. 

Third-party debt collection efforts rely primarily on a combination of 

telephone and postal mail contacts. Several large debt collection 

 

43FTC staff guidance has indicated that if the debt collector’s first communication with the 

consumer is oral (e.g., a telephone conversation), the debt collector may make the required 

disclosure at that time and need not send a written notice. However, if the notice is not 

included in the initial communication with the consumer, the notification must be provided 

in writing within 5 days after the initial communication in connection with the collection of 

any debt. See FTC Statements of General Policy or Interpretation Staff Commentary on the 

Fair Debt Collection Practices Act, 53 Fed. Reg. 50097, 50108 (Dec. 13, 1988) and 15 U.S.C. 

1692g(a). 

Page 22 GAO-09-748 Credit Card Debt Collection
 

companies have multiple call centers—for example, one large collection 

company told us it operates about 125 call centers throughout the United 

States and overseas and employs about 15,000 collectors. Technology 

fundamentally has changed the practice of debt collection. We toured a 

call center at one third-party collection company and observed that 

collectors had on-screen access to detailed information about debtors and 

their financial histories. The software systems used for collection can also 

allow supervisors to monitor the collection activities of staff. Software 

applications also help manage collectors’ workflows and can help ensure 

compliance with federal and state law. Predictive dialers and other 

telephone technology improve efficiency by reducing the wait time for 

collection staff. For example, predictive dialing systems can be 

programmed not to call consumers earlier, later, or more frequently than 

permitted by FDCPA or applicable state law. One large agency told us it 

recently designed a proprietary voice recognition system that tries to 

recognize when collectors engage in inappropriate behavior, such as 

speaking with an abusive tone or using profanity. Word processing and 

automated mail sorting systems allow debt collectors to send customized 

mass mailings relatively inexpensively. Some collection agencies contract 

with third-party vendors to handle the design and mailing of their 

customized FDCPA-compliant letters. 

Officials at the 12 third-party collection companies and debt buyers with 

whom we spoke required their collectors to participate in training 

programs that ranged in length from 1 to 4 weeks. Topics can include debt 

collection techniques, negotiation skills, compliance with applicable law, 

and use of desktop technologies. Some collection companies told us they 

periodically retest their staff and provide additional training to respond to 

changes to any applicable state fair debt collection law. While 

compensation plans can vary among companies, the incomes of collection 

staff are typically some combination of hourly wage and a commission 

based on their performance in recovering debts. 

With the authorization of their creditor clients, collection companies can 

offer a variety of repayment plans to debtors, which may include 

installment payments (that is, fixed monthly payments) or settlements for 

less than the amount due. If applicable, and authorized by their creditor 

clients, companies can also elect to discount interest and fees that have 

accumulated on the account. Options for methods of payment have 

expanded in recent years and now include electronic fund transfers, debit 

cards, and credit cards. Contracts between issuers and collection agencies 

often specify the policies and procedures to be used during the collection 

process. According to issuers and collection agencies we met with, this 

Page 23 GAO-09-748 Credit Card Debt Collection
 

can include details on how and when cardholders may be contacted, 

options that can be offered for repayment and settlement, and how 

consumer disputes are to be addressed. For example, several issuers 

required collection agencies to forward disputed accounts to them for 

investigation. Several issuers also told us that contracts typically include 

data security requirements and provisions allowing issuers to monitor and 

audit the collection agency. For example, large issuers sometimes have 

access to the internal communications systems of the third-party agencies, 

allowing them to listen to live collection calls from a remote location. 

Issuers also said they conduct regular audits of their collection vendors, 

which include reviews of data security, financial records, and compliance 

with applicable law and any policies specified by the issuer. While 

contracts usually specify how long the account will be placed with the 

agency, some collection agencies told us that early termination is allowed 

if the agency is not meeting compliance or performance standards. 

Collection law firms specialize in collecting debts. The National 

Association of Retail Collection Attorneys stated in a June 2007 comment 

letter to FTC that about 5 percent of delinquent accounts (including credit 

card accounts) are referred to collection law firms for possible litigation, 

typically after collection efforts by internal and third-party collectors have 

failed. One issuer we spoke with places certain accounts with a collection 

law firm as soon as the issuer determines that a delinquent debtor has the 

ability to pay. Collection law firms involved in the recovery of debt are 

generally paid by contingency fee and receive a set percentage of debt 

recovered.44 In addition to using collection law firms, officials of some 

issuers and third-party collection companies told us they also maintained 

their own legal staff to litigate collection cases. 

Collection Law Firms 

Many collection law firms use traditional collection methods, such as 

telephone calls and letters, before starting litigation. These firms may 

collect on various types of debt, such as installment loans, credit card, 

automobile, or medical debt. Some of these firms also purchase portfolios 

of debt. Issuers and debt collection agencies may also contract with a 

network of collection law firms to facilitate the filing of lawsuits against 

debtors in multiple states. Collection attorneys and law firms are subject 

 

44In addition to taking legal action for the recovery of debt on behalf of creditors, some 

firms also provide more traditional legal services for creditors, such as representing clients 

in bankruptcy filings, against class action lawsuits, or in the sale of debt portfolios. These 

services are typically billed on an hourly basis rather than paid through a contingency fee, 

according to firms with which we spoke. 

Page 24 GAO-09-748 Credit Card Debt Collection
 

to FDCPA, although some states may exempt collection attorneys from 

state debt collection laws under certain circumstances. 

Issuers and other data furnishers, such as collection agencies, can furnish 

data and information about debtor accounts to consumer reporting 

agencies, which maintain up-to-date, account-level information on 

consumer credit histories that is used to help make important decisions 

about individuals, such as eligibility for credit, employment, or housing. 

Federal law requires consumer reporting agencies and all data furnishers 

to take responsibility for ensuring the accuracy of account information 

being reported. 

Credit Reporting 

Furnishing data to consumer reporting agencies is optional. While all of 

the issuers we met with chose to furnish data to consumer reporting 

agencies, some issuers, third-party collection agencies, and collection law 

firms may choose not to. Contracts for collection services generally 

stipulate each party’s responsibility for credit reporting. For example, four 

of the six large issuers told us that their contracts with collection agencies 

generally stipulate that the issuer rather than the collection agency retains 

responsibility for furnishing account data to consumer reporting agencies. 

Collection companies collecting on their own debts may choose to furnish 

data as a collection tool—consumers may be motivated to repay their 

debts to avoid damaging their credit records. One stakeholder told us that 

those companies that choose not to furnish account data may, among 

other things, want to limit their exposure to liability related to FCRA 

compliance. 

Consumer reporting agencies and the great majority of data furnishers use 

a standard data format, known as Metro 2, to help ensure consistency and 

accuracy in the reporting of information. The original Metro format was 

developed in the mid-1970s and by 1996, more than 95 percent of all data 

were furnished using this format. The Metro 2 format was introduced in 

1997. It requires furnishers to provide more specific and complete 

information—such as the full account number and other fields that further 

identify the account—to improve accuracy and completeness. Consumers 

can dispute information in their credit reports related to delinquent credit 

card accounts by contacting the issuer, debt collector, or consumer 

reporting agency by telephone, mail, or online. Data furnishers, such as 

card issuers or debt collectors, must investigate disputes they receive from 

consumer reporting agencies and send the results back to the agency. The 

consumer reporting agency has 30 days to complete its investigation and, 

if necessary, update the consumer’s credit report. Data furnishers and 

Page 25 GAO-09-748 Credit Card Debt Collection
 

consumer reporting agencies can use a Web-based automated system 

called e-Oscar to transmit information regarding consumer disputes. 

Credit Card Debt Often Is 

Sold and Resold 

Issuers often sell portfolios of delinquent credit card debt to debt-buying 

companies. By selling accounts, issuers trade the longer-term cash flows 

of collection agency recoveries for the short-term proceeds of a sale to 

recover some of their losses. Credit card accounts can be resold multiple 

times. Five of the six large issuers with which we spoke currently sell at 

least some of their delinquent credit card debt to debt buyers. The issuer 

that does not currently sell its debt told us it had done so in the past but 

stopped 5 years ago because it believes its internal collection strategies 

and outsourcing to third-party collectors yield better results. Reputation 

risk can also be a factor in the decision to sell debts since issuers have 

limited control over the debt collection practices of new owners of the 

debt. Because the price issuers receive when they sell credit card debt has 

declined in recent years, at least one issuer told us it had reduced its sale 

of such debt—it sold 659,000 accounts with a face value of $3.6 billion in 

2008, as compared with 750,000 accounts with a face value of $5.4 billion 

in 2006. Another issuer told us that in 2009 it sold approximately 6.6 

percent of the inventory of charged-off debt it had accrued since 2001, 

which had been the year of its most recent prior sale of debt. In addition, 

one issuer told us that it had sold a small percentage of its charged-off 

debts from 2007 to 2009. Two other issuers declined to provide us with 

data on their sale of credit card debt because they considered this 

information proprietary. 

Some debt-buying companies may purchase portfolios of debt that they 

collect on themselves, while other debt buyers may outsource all of their 

collections to third-party collection agencies or law firms. According to 

the trade association DBA International, debt buyers that do not collect on 

their own debt (sometimes called “passive” debt buyers) are generally not 

subject to FDCPA since they take no action to collect on the debt and do 

not communicate with the consumer. Portfolios of credit card accounts 

can be sold through public or Web-based auctions or through direct 

placements arranged by buyers and sellers. A portfolio of debts can be 

sold in bulk for an agreed-upon price or in a “forward flow” arrangement 

in which sellers agree to sell a steady volume of accounts for a specified 

period of time. Forward flow contracts provide sellers with a predictable 

stream of revenue for their charged-off accounts. 

In addition, sales of credit card debt can be made through debt brokers—

firms that facilitate the transaction between buyer and seller but never 

Page 26 GAO-09-748 Credit Card Debt Collection
 

themselves attempt to collect on the debt. These firms charge a fee that 

may range from 6 to 8 percent of the portfolio’s purchase price. One 

industry publication reported that in 2007 the top three debt brokers—

National Loan Exchange, Garnet Capital Advisors, and LoanTrade—had 

managed a total of $17 billion in credit card sales.45 We spoke with an 

official at one of these three debt brokers, who explained its process for 

brokering the sale of a portfolio of credit card debt: A financial institution 

contacts the broker with information on the debt portfolio it wishes to sell 

and the broker analyzes the portfolio and studies market conditions to 

determine an appropriate price for the portfolio. The broker then 

describes the portfolio in a detailed memo that is marketed to perhaps 200 

potential buyers. A smaller number of interested buyers will receive 

further information and conduct their own analysis of the portfolio. On 

behalf of the seller, the broker will then offer the debt portfolio either 

through a sealed bidding process or an online auction. 

Sellers and buyers conduct due diligence before making a bid or 

completing a transaction, which can include a review of the other party’s 

policy and procedures regarding collection operations, compliance with 

applicable state and federal laws, and professional references. Some credit 

card issuers told us they sell accounts only to debt buyers with which they 

are familiar because of concerns about reputation risk; one of these 

issuers requires buyers to be certified annually to be eligible to purchase 

its accounts. Similarly, on the debt buyer side, some buyers require the 

seller to complete a survey to provide them with more information about 

the accounts being sold. 

According to several industry stakeholders we spoke with, when preparing 

a portfolio for sale, a debt seller generally scrubs the accounts to remove 

those in which the debtor has died, filed for bankruptcy, settled the debt, 

or alleged fraud or identity theft. Prior to bidding on a credit card 

portfolio, debt buyers typically do their own reviews and scrubs of the 

accounts, according to DBA International. They may also review the 

portfolio’s contents to determine the potential return on investment and if 

the strategies required to collect on the accounts would be consistent with 

the buyer’s operations. According to ACA International’s industry 

guidance, once a bid has been accepted and a transaction completed, 

certain documents, such as a bill of sale and a list of the accounts sold, 

may be used to legally document transfer of ownership. 

 

45The Nilson Report, Issue 901, April 2008. 

Page 27 GAO-09-748 Credit Card Debt Collection
 

According to several industry stakeholders, as well as industry guidance 

published by ACA International, contracts for sales of debt portfolios can 

typically include provisions that specify the nature and extent of the 

account data that will be provided to the buyer, as well as the buyer’s 

access to account media—for example, credit card applications and billing 

statements—or other documentation. Some contracts can include “buyback” and “put-back” rights, which allow buyers and sellers to remove and 

receive remuneration for certain accounts, such as those involving 

evidence of fraud or deceased debtors. The contracts also may include 

indemnification provisions—for example, holding the first buyer 

responsible for any liability incurred as a result of the actions of a 

subsequent buyer. Some contracts also may limit the terms under which 

the buyer can resell the accounts. For example, one issuer with which we 

spoke prohibits its debt buyers from reselling the accounts for 1 year after 

purchase. Another issuer requires the debt buyer to receive its approval to 

resell the accounts, noting that the criteria for selecting the secondary 

buyer must be similar to that used by the issuer. 

The price of a credit card portfolio is largely driven by certain key 

characteristics—most notably, the age of the debt and the number of times 

it has previously been placed for collection with a third-party agency. For 

example, accounts that are 91 days to 6 months past due and never 

previously placed for collection generally receive the highest prices, while 

older accounts and those previously placed for collection typically receive 

far lower prices. Some stakeholders told us that the geographic location of 

accounts can also affect pricing since state laws on debt collection, 

statutes of limitation, and other issues can affect the ability to recover on 

the accounts. For example, one debt broker told us that prices may be 

lower in states that prohibit the garnishment of wages in debt collection 

judgments. The debt broker added that the issuer’s underwriting criteria, 

the average account balance, and the amount of documentation available 

all can affect the price of a portfolio. 

Limited publicly available data exist on the exact prices of credit card 

portfolios. As shown in table 2, Kaulkin Ginsberg estimated that in January 

2009, accounts that were up to 6 months delinquent and had not been 

placed with a collection agency typically sold for an estimated 51⁄2-71⁄2 

cents for each dollar of face value. Older debt typically sold for much 

less—for example, accounts that were more than 2 years delinquent or had 

been previously placed with two collection agencies sold for an estimated 

1-2 cents for each dollar of face value. Prices for all types of delinquent 

credit card debt have declined significantly in recent years, which Kaulkin 

Ginsberg attributes largely to a weakening economic environment that has 

Page 28 GAO-09-748 Credit Card Debt Collection
 

reduced consumers’ ability to repay debts and reduced buyers’ willingness 

to pay as much for underperforming assets. 

Table 2: Estimated Price Ranges for Credit Card Debt, Per Dollar of Account Face 

Value, March 2007 and January 2009 

Type of debt March 2007 January 2009

Fresh: 

91 days to 6 months past due and never placed 

with a collection agency $0.12 - $0.17 $0.055 - $0.075

Primary: 

6 to 12 months past due and never placed with a 

collection agency $0.08 - $0.12 $0.035 - $0.05

Secondary: 

12 to 24 months past due and/or previously 

placed with 1 collection agency $0.055 - $0.09 $0.02 - $0.03

Tertiary: 

More than 2 years past due and/or previously 

placed with 2 collection agencies $0.03 - $0.05 $0.01 - $0.02

Quad: 

More than 3 years past due and/or previously 

placed with 3 collection agencies $0.01 - $0.025 $0.004 - $0.01

Source: Kaulkin Ginsberg, InsideARM. 

Note: The definitions in this table for fresh, primary, secondary, tertiary, and quad debt are those used 

by Kaulkin Ginsberg, but these definitions can vary across the debt collection industry. 

After a debt buyer purchases a portfolio of accounts it has similar options 

as an issuer in choosing how to collect on the accounts. It can choose to 

collect or litigate using internal resources, contract the collection of the 

account to a third-party agency or law firm, or resell the accounts, or a 

portion of them, to a secondary buyer. The resale of debt has increased in 

recent years, according to Kaulkin Ginsberg, and debt can be resold 

multiple times. One debt buyer estimated that almost half of all credit card 

accounts purchased directly from original creditors eventually are resold. 

As with the original sale of a debt portfolio, resale can occur through a 

public auction, directly between debt buyers, or through a debt broker 

serving as intermediary. The extent to which debt buyers resell their debt 

depends to some extent on their business model. “Passive” debt buyers do 

not attempt to collect debts directly, but rather resell or outsource 

everything they purchase to collection agencies or law firms. Other debt 

buyers purchase portfolios, attempt collection for a certain period, and 

then resell accounts for which collection was not successful. Several 

industry stakeholders with whom we spoke noted that a debt buyer’s due 

diligence becomes especially important for portfolios that have been sold 

Page 29 GAO-09-748 Credit Card Debt Collection
 

multiple times because fraud or inaccurate account data can be more 

prevalent in these accounts. 

State and federal enforcement actions, anecdotal evidence, and the 

volume of consumer complaints to federal agencies—about such things as 

excessive telephone calls or the addition of unauthorized fees—suggest 

that problems exist with some processes and practices involved in the 

collection of credit card debt, although the prevalence of such problems is 

not known. FDCPA, which was enacted in 1977, does not reflect certain 

changes that have occurred since that time with regard to modern 

technology and the debt collection marketplace. 

Certain Issues Exist 

about Some Debt 

Collection Practices 

and FDCPA Does Not 

Address Some 

Changes That Have 

Occurred in 

Technology and the 

Marketplace 

Issuers’ In-house 

Collection Operations 

Have Been the Source of 

Complaints, but Regulators 

Have Identified Relatively 

Few Serious Problems 

The federal depository regulators—FDIC, Federal Reserve, OCC, and 

OTS—and FTC track consumer complaints related to issuers’ in-house 

debt collection practices.46

As shown in table 3, during 2004-2008, the depository regulators received 

an average of about 2,000 complaints per year about the credit card debt 

collection practices of the institutions they supervise. These complaints 

constituted, on average, about 12 percent of all complaints that the 

depository regulators received about credit cards and 4 percent of 

complaints received about any topic during that time frame. FTC does not 

track whether complaints are related specifically to credit card debt, but 

during the same 5-year period it received about 22,400 complaints annually 

about original creditors’ overall debt collection practices. Our review of 

FTC complaint data indicates that roughly 25 percent of the complaints 

Complaints about Issuers 

 

46We did not include the NCUA in the scope of our review of consumer complaints because 

officials told us that credit unions represent a very small share of the credit card market. 

Page 30 GAO-09-748 Credit Card Debt Collection
 

FTC received about debt collection were complaints about original 

creditors (as opposed to third-party collectors). However, data were not 

available on the extent to which the consumer complaints were against 

larger versus smaller creditors. 

Table 3: Number of Consumer Complaints Received by Federal Depository 

Regulators and FTC, 2004-2008 

Federal Depository Institution Regulators FTC 

Year 

Total number 

of consumer 

complaints

 received 

Total number 

of credit card 

complaints 

received

Total 

number of 

credit card 

FDCPA 

complaints 

received 

Total number of 

debt collection 

complaints about 

original creditors

2004 44,328 15,229 2,257 20,588

2005 47,714 16,579 1,954 23,637

2006 43,319 13,502 1,625 21,465

2007 49,727 17,064 1,641 20,095

2008 63,024 19,023 2,434 26,615

Source: GAO analysis of FDIC, Federal Reserve, FTC, OCC, and OTS data. 

FDIC and OTS complaint data showed that common allegations in 

complaints received about issuers included attempts to collect debt not 

owed and inappropriate practices such as excessive telephone calls or 

harassment. Among the most common complaints that FTC received about 

creditor debt collection were excessive telephone calls, creditors 

misrepresenting the amount or legal status of a debt, the addition of 

unauthorized fees and interest to accounts, and telephone calls from 

creditors looking for other individuals. However, consumer complaints 

may not be a reliable indicator of the extent of problems that may be 

occurring, for several reasons. Many consumers who experience problems 

with debt collection likely do not complain to any government agency—in 

many cases because they may not know to which agency to complain or 

because they do not know that their rights have been violated. 

Additionally, FTC has noted that a complaint does not necessarily indicate 

that a violation of law has occurred—either because the complaint is 

inaccurate or, if accurate, does not represent an actual violation. 

As discussed earlier, federal depository regulators conduct examinations 

of the entities they supervise and may take formal or informal 

enforcement actions when they find noncompliance with applicable laws 

and regulations. From 1999 to 2008, OCC, OTS, and Federal Reserve did 

Enforcement Actions against 

Issuers 

Page 31 GAO-09-748 Credit Card Debt Collection
 

not find any problems in their bank examinations related to credit card 

debt collection that resulted in a formal enforcement action. FDIC took 

formal enforcement action during that time frame against three issuers 

related, among other things, to their oversight of CompuCredit 

Corporation, a third-party vendor used to market, service, and collect debt 

on some of the issuers’ credit card accounts.47 The issuers themselves 

were not alleged to have engaged in improper debt collection, but they 

were each found to have had inadequate compliance systems to conduct 

proper oversight of CompuCredit, which was accused of engaging in 

deceptive collection practices.48 The issuers entered into a consent 

agreement, in which they agreed to a cease and desist order and to pay 

restitution and civil money penalties, without admitting or denying the 

alleged violations.49

uch 

n, and the Federal Reserve, FDIC, and 

OTS told us they did not take any. 

sitory 

department stores related to the collection practices of their private-label 

 

Depository regulators also can take informal enforcement actions—s

as commitment letters, memorandums of understanding, and board 

resolutions—when they find weaknesses that are more technical in nature, 

but for which corrective action still is needed. From 1999 through 2008, 

OCC told us it took one informal enforcement action against an issuer that

related to credit card debt collectio

In addition to the enforcement actions taken by the federal depo

regulators, in the late 1990s FTC reached settlements with four 

47FDIC issued cease and desist orders in the following cases: In the Matter of Columbus 

Bank and Trust Company, Columbus, Georgia, FDIC Nos. 08-033b and 08-034k (June 9, 

2008); In the Matter of First Bank & Trust, Brookings, South Dakota, FDIC Nos. 07-228b 

and 07-260k (Mar. 26, 2009); and In the Matter of First Bank of Delaware, Wilmington, 

Delaware, FDIC Nos. 07-256b and 07-257k (Oct. 9, 2008). 

48In the Matter of CompuCredit Corporation Atlanta, Georgia, FDIC Nos. 08-139b and 08-

140k (Dec. 19, 2008). FDIC issued a cease and desist order in the case. 

49Columbus Bank and Trust Company agreed to pay a total of $9.9 million in civil penalties 

and restitution; First Bank & Trust agreed to pay a total of $285,000 in civil penalties and 

restitution; First Bank of Delaware agreed to pay $1.04 million; and CompuCredit 

Corporation agreed to pay civil penalty of $2.4 million and restitution of not less than $100 

million. 

Page 32 GAO-09-748 Credit Card Debt Collection
 

credit cards.50 FTC alleged that the stores had induced cardholders who 

filed for bankruptcy protection to “reaffirm” their credit card accounts and 

falsely represented that these “reaffirmation agreements” would be filed 

with the bankruptcy courts.51 The resulting consent agreements with the 

four department stores ensured that at least $183 million would be 

returned to consumers whose debts had been collected illegally. 

The Department of Justice’s U.S. Trustee Program has taken one 

enforcement action against an issuer related to credit card debt collection. 

In November 2008, the program settled with Capital One for allegedly 

collecting on credit card debts that had been discharged in bankruptcy, 

which is a violation of the U.S. Bankruptcy Code.52 According to the 

Trustee Program, Capitol One did not have effective procedures for 

identifying customers who had filed for bankruptcy. As a result, the issuer 

had improperly filed proof of claims in approximately 5,600 cases when it 

knew or should have known that the debt had been discharged, and the 

issuer improperly collected approximately $340,000 from debtors’ Chapter 

13 bankruptcy estates nationwide in violation of federal bankruptcy law. 

 

50In the Matter of Sears, Roebuck and Co., FTC No. C-3786 (Feb. 20, 1998) (relevant 

consent agreement reserved a right for FTC to file another action if the settlement in a 

separate class action suit totaled less than $100 million); In the Matter of Montgomery 

Ward Credit Corporation, and General Electric Capital Corp., FTC No. C-3839 (Dec. 11, 

1998) (relevant consent agreement reserved a right for FTC to intervene in related lawsuits 

if aggregate settlement amounts therein were less than $60 million); In the Matter of The 

May Department Stores Company, FTC No. C-3848 (Jan. 20, 1999) (relevant consent 

agreement required the company to refund at least $15 million to consumers who, having 

had their credit card account debts discharged in bankruptcy proceedings, continued to 

make payments or faced illegal collection efforts); and In the Matter of Federated 

Department Stores, Inc., FTC No. C-3893 (Aug. 20, 1999) (relevant consent agreement 

ensured that the company made full refunds totaling up to $8 million to consumers who, 

having had their account debts discharged in bankruptcy proceedings, continued to make 

payments or faced illegal collection efforts). The issuance of private-label cards by retail 

stores has declined in popularity in the current credit card market. It is more common 

today for such stores to have an agreement with a large bank to issue cards in their name.

51Bankruptcy filers may voluntarily reaffirm—that is, agree to pay—certain debts with 

creditor firms in an effort to retain assets. However, the U.S. Bankruptcy Code requires 

that such agreements be filed with the bankruptcy courts, and in the case of debtors not 

represented by legal counsel, reaffirmation agreements must be approved by the court. 11 

U.S.C. § 524(c). FTC alleged that these stores did not file the agreements or the bankruptcy 

courts did not approve them and, therefore, the agreements were unenforceable and the 

stores unfairly collected many of these debts. 

52Galley v. Capital One Bank (USA), N.A., No. 06-12142-JNF (Bankr. E.D. Mass. 2008).

Page 33 GAO-09-748 Credit Card Debt Collection
 

The scope of this report is largely on the debt collection practices of the 

very largest credit card issuers—all of which are federally supervised 

banks—but it should be noted that concern about debt collection 

practices has often focused on the smaller, subprime credit card issuers. 

Representatives of the National Consumer Law Center told us that 

subprime issuers, which are often small, local banks, have been very 

aggressive in their debt collection efforts, and a report by the center 

alleged that some high-fee subprime card issuers frequently employ 

abusive debt collection practices.53 FDIC staff told us that to the extent 

that debt collection abuses occur, they may be more common among 

smaller issuers, particularly subprime issuers, since large issuers tend to 

have more compliance resources and may be more mindful of the 

collection practices they use since they are sensitive to preserving their 

reputations in a mature credit card marketplace. Data on the proportion of 

consumer complaints on debt collection practices that were made against 

larger versus smaller issuers are not readily available. 

Some consumer group representatives have raised concerns about some 

issuers’—including large issuers—debt collection practices, such as the 

use of arbitration in resolving debt collection matters. Cardmember 

agreements sometimes require that disputes about a cardholder’s account 

be handled through arbitration, a form of alternative dispute resolution in 

which disputes are resolved by an independent arbitrator, rather than by a 

judge in a formal court. Some consumer advocates expressed concern that 

requiring arbitration is unfair because they believe the arbitration system 

can be biased against consumers. A September 2007 report by Public 

Citizen that reviewed arbitration cases in California found that business 

entities prevailed in about 94 percent of debt collection cases.54 In July 

2009, the Minnesota Attorney General announced that it had reached a 

settlement with the National Arbitration Forum—the country’s largest 

administrator of credit card and consumer collections arbitrations—in 

which the company agreed to permanently stop administering arbitrations 

involving consumer debt. The representatives of the large issuers with 

whom we spoke said that they rarely or never engage in arbitration 

involving delinquent or charged-off accounts. 

 

53National Consumer Law Center, Fee Harvesters: Low-Credit, High-Cost Cards Bleed 

Consumers (Boston, Mass., November 2007). 

54Public Citizen, How Credit Card Companies Ensnare Consumers (Washington, D.C., 

September 2007). Public Citizen examined 33,948 National Arbitration Forum arbitration 

filings in California, nearly all of which related to collection matters. 

Page 34 GAO-09-748 Credit Card Debt Collection
 

No comprehensive data exist on the extent to which abusive practices may 

be occurring among third-party debt collectors and debt buyers. 

Nevertheless, FTC, state agencies, and consumer groups have expressed 

concerns in recent years that abusive practices are occurring. Although 

the extent of problems is not known, several indicators—primarily 

complaint data, government enforcement actions, private lawsuits, and 

anecdotal evidence—suggest they may not be uncommon. 

FTC receives more complaints about the debt collection industry than it 

does any other specific industry. In 2008, the agency received about 79,000 

complaints on third-party debt collectors, which represented almost 19 

percent of all consumer complaints it received on any topic. These figures 

are for complaints related to the collection of any debt—not just credit 

card debt—because FTC does not track complaints by type of debt. 

Complaints about debt collection have increased in recent years and grew 

34 percent from 2004 through 2008. Our analysis of FTC complaint data 

found that the most common complaints from 2004 through 2008 related 

to debt collectors were, in order of prevalence, (1) misrepresentation of 

the amount or legal status of a debt; (2) excessive telephone calls; (3) 

telephone calls from collectors looking for other individuals; (4) use of 

obscene, profane, or abusive language; and (5) threatening to sue if 

payment was not made. 

Some Debt Collection 

Industry Practices Have 

Been the Source of Much 

Concern, but the Extent of 

Problems Is Unknown 

Complaints about Third-party 

Collectors 

The Better Business Bureau, which also collects consumer complaints, 

reported receiving about 16,000 complaints about debt collection 

companies in 2008. These companies represented the sixth most common 

source of complaints received during 2005-2008. Some state agencies also 

collect consumer complaints about debt collection practices. The National 

Association of Attorneys General found that debt collection complaints 

were the number one topic of complaints received by state Attorneys 

General in 2008. Representatives from three state agencies also told us 

that they receive more complaints about the debt collection industry than 

any other topic. 

As noted earlier, complaint data may not be an accurate gauge of the 

extent of problems. One debt collection industry representative noted that 

because of the nature of their work, it is unsurprising that large numbers 

of people have grievances with them. Moreover, consumers’ complaints 

are not always valid. Industry representatives also point out that the 

number of complaints against the debt collection industry represents a 

very small fraction of the more than 1 billion consumer contacts the 

industry makes each year. Furthermore, increases in consumer complaints 

may result, in part, from the ease with which technologies such as the 

Page 35 GAO-09-748 Credit Card Debt Collection
 

Internet allow consumers to file a complaint. These effects would tend to 

overstate the number of actual problems; on the other hand, consumer 

complaints are self-reported and there are likely to be a number of 

complaints that are unreported. 

Since FDCPA was enacted in 1977, FTC has taken at least 60 enforcement 

actions alleging violations related to debt collection.55 We analyzed the 24 

actions initiated in 1998-2008 against collection companies and found that 

13 of them involved or may have involved the collection of credit card debt 

(as opposed to other forms of debt).56 In these actions, FTC alleged 

violations of FDCPA and/or the FTC Act, which included, among other 

activities, harassing and abusing consumers, communicating with the 

consumers’ employers and co-workers about their debts, threatening to 

initiate lawsuits or criminal actions against consumers if they failed to pay, 

and failing to notify consumers of their right to dispute and obtain 

verification of their debts. FTC reached a settlement agreement with the 

defendant in all 13 cases, and penalties included requiring collectors and 

debt buyers to pay civil monetary penalties and return wrongfully 

collected funds to consumers. In some cases, FTC also required debt 

collection agencies to develop procedures to address the alleged abusive 

practices. For example, one collection agency had to develop a 

comprehensive consumer complaint and resolution program and 

implement a training program that had to be approved by FTC. 

Enforcement Actions against 

Third-party Collectors 

Examples of FTC’s actions against third-party debt collection companies 

include the following: 

• In March 2004, FTC alleged that Capital Acquisitions & Management—a 

debt buyer that purchases credit card debt—violated FDCPA by 

threatening and harassing numerous consumers to get them to pay debts 

they did not owe or that were beyond the statute of limitations.57

According to FTC, the firm bought lists of debts that were outdated and 

frequently contained no documentation about the original debt and in 

 

55The number of FTC enforcement actions should not be seen as a proxy for the extent of 

problems or violations in the law in any given industry. 

56Three of these 24 enforcement actions specified credit card debt, 10 did not specify the 

type of debt collected, and 11 clearly involved debt other than credit card debt, such as 

mortgage and payday loans. 

57United States v. Capital Acquisitions & Management Corp., No. 04 C 50147 (N.D. Ill. 

filed Mar. 24, 2004). 

Page 36 GAO-09-748 Credit Card Debt Collection
 

many cases inadequate information about the original debtor. In its press 

release, FTC alleged that the firm made efforts to find people with the 

same name in the same geographic area and tried to collect the debts from 

them, whether or not they were the actual debtor. The firm would tell 

these consumers that they were legally obligated to pay the debt and, if 

they failed to, could be arrested, jailed, or have their property seized, FTC 

alleged. Capital Acquisitions & Management settled with FTC in March 

2004, without admitting liability for any matter alleged in the complaint, 

and paid a civil penalty of $300,000. In the 8 months following the 

settlement, FTC reported receiving more than 2,000 consumer complaints 

against the firm and filed another complaint about the firm’s practices. A 

second enforcement action against this company and other named 

defendants resulted in a $1 million judgment as equitable monetary relief 

and permanently barred the corporate defendants and some of the 

company’s management from engaging in debt collection activities.58

• In June 2008, FTC alleged that Jefferson Capital Systems, LLC, a debt 

collection company, and CompuCredit Corporation violated the FTC Act 

and Jefferson Capital Systems, LLC also violated FDCPA by engaging in 

deceptive marketing and abusive collection practices.59 According to FTC, 

the firms marketed a preapproved credit card to consumers with chargedoff debt, telling them that their old debt balance immediately would be 

transferred to the new credit card and reported as paid in full to consumer 

reporting agencies. However, consumers who accepted the offer 

immediately were enrolled in a debt repayment plan and did not receive a 

credit card until they paid 25 to 50 percent of their charged-off debt. 

Additionally, FTC alleged that Jefferson Capital used obscene or profane 

language in debt collection and caused telephones to ring or engaged 

persons in telephone conversation repeatedly with the intent to annoy, 

abuse, or harass. The settlement prohibited Jefferson Capital from 

engaging in the alleged conduct and required it to comply with FDCPA. 

• In November 2008, FTC settled with the debt collection agency Academy 

Collection Service, Inc. and its owner for $2.25 million, which FTC said 

was the largest civil penalty FTC assessed in a debt collection action.60

 

58FTC v. Capital Acquisitions & Management Corp., No. 04 C 7781 (N.D. Ill. filed Apr. 11, 

2005). 

59FTC v. CompuCredit Corp., No. 1:08-CV-1976 (N.D. Ga. Dec. 19, 2008) (stipulated order 

without the defendants admitting liability for any violation alleged in the complaint). 

60United States v. Academy Collection Service, Inc., No. 2:08-cv-01576-KJD-GWF (D Nev. 

Nov. 19, 2008). Defendants did not admit to the matters alleged in the complaint. 

Page 37 GAO-09-748 Credit Card Debt Collection
 

Academy’s collectors allegedly engaged in false threats of wage 

garnishment, arrest, and legal action; communicated with third parties 

about consumers’ debts; and called consumers at their workplace when 

employers prohibited such calls. Other practices included unauthorized 

withdrawals from consumers’ bank accounts and the early deposit of 

consumers’ postdated payment checks. According to its press release, FTC 

also alleged that Academy dismissed consumers’ complaints without 

sufficient investigation or did not properly discipline collectors who were 

found to have violated FDCPA. In addition to the civil money penalty, FTC 

also required Academy to make certain disclosures, such as consumers’ 

right to have the company stop contacting them about their debt. 

FTC also has taken enforcement actions against debt collection companies 

for allegedly violating FCRA by reporting inaccurate information to 

consumer reporting agencies. In 2000, FTC alleged that Performance 

Capital Management maintained old, inaccurate information and failed to 

report disputes to consumer reporting agencies. The consent decree 

settling this action imposed a civil penalty of $2 million, which was waived 

because of the company’s poor financial condition.61 In 2004, FTC alleged 

that NCO Group reported accounts using incorrect delinquency dates, 

which can cause negative information to remain on a consumer’s credit 

report beyond the 7-year reporting period permitted under FCRA. NCO 

Group paid a $1.5 million civil penalty to settle FTC’s charges.62

While comprehensive data on state actions are not available, our analysis 

of information provided by the National Association of Attorneys General 

found at least 60 enforcement actions were taken by state attorneys 

general against debt collection companies from January 2006 through May 

2009, of which 28 involved or may have involved the collection of credit 

card debt. These actions alleged a variety of illegal debt collection 

practices, such as deducting money from consumers’ bank accounts 

without authorization, operating in states without proper licenses, and 

refusing or failing to provide consumers with proof of their debts. 

Generally, state attorneys general either negotiated a settlement with the 

debt collection company or brought a court action against the company. 

Settlements included penalties such as refunds to consumers, cancellation 

State Enforcement Actions and 

Private Lawsuits 

 

61United States v. Performance Capital Management, Inc., No. 2-01-cv-01047TJH-E (C.D. 

Cal. 2001) (consent agreement without adjudication of any issue of fact or law and without 

defendants admitting liability or fault). 

62United States v. NCO Group, Inc., No 04-2041 (E.D. Pa. 2004) (consent decree without 

adjudication of any issue of fact or law and without defendants admitting liability). 

Page 38 GAO-09-748 Credit Card Debt Collection
 

of consumers’ debts, civil penalties, and injunctive relief aimed at 

preventing future collection violations. 

Among these state enforcement actions were the following: 

• In 2006, the Massachusetts Office of the Attorney General settled with a 

debt collection law firm for allegations of unfair debt collection practices 

that violated state and federal debt collection laws. According to the 

state’s office, representatives of the firm, among other violations, used 

obscene language, harassed and embarrassed consumers, exceeded the 

number of permissible calls, placed calls to consumers at improper hours, 

disclosed debts to persons other than the consumer, and failed to provide 

proof of the validity of debts. Under the settlement, the firm is required to 

pay a total of $75,000, including $20,000 in consumer restitution, and 

agreed to implement new policies and procedures. 

• In 2007, the Office of the Illinois Attorney General sued a debt buyer for 

violations of the Illinois Consumer Fraud and Deceptive Business 

Practices Act. According to the Illinois office, the company used abusive 

practices to attempt to collect on time-barred debts more than 10 years 

old, debts that had been discharged in bankruptcy, and debts that had 

been settled. Additionally, the company allegedly refused or failed to 

provide proof of debts, illegally contacted consumers’ family members and 

workplaces, and withdrew money without authorization from consumers’ 

bank accounts. Under the stipulated final judgment, the company paid 

$100,000 to the state. 

As noted earlier, FDCPA provides consumers with a private right of action, 

allowing them to bring civil actions against debt collectors that violate its 

provisions and be awarded monetary damages. The Senate report that 

accompanied FDCPA indicates that Congress intended these private 

lawsuits to provide an important incentive to debt collection companies to 

comply with the act. While the exact number of private lawsuits for 

violations of FDCPA is not known, representatives of the debt collection 

industry told us that such suits were relatively common. The FDCPA Case 

Listing Service, LLC—a private firm that tracks such litigation—reported 

that 5,383 cases were filed against collection agencies, collection law 

firms, and debt buyers in U.S. District Court in 2008 for alleged violations 

of FDCPA. A representative of the firm noted that this figure does not 

include FDCPA lawsuits filed in state courts, of which there are also 

believed to be a substantial number. 

Page 39 GAO-09-748 Credit Card Debt Collection
 

While consumers’ private right of action can provide an incentive for debt 

collectors to comply with FDCPA, representatives of the debt collection 

industry told us that many of the FDCPA lawsuits filed are for what they 

consider to be technical violations of the statute that have caused no 

actual harm to the debtor. For example, the National Association of Retail 

Collection Attorneys believes that a significant burden has been placed 

upon debt collectors that have been forced to defend FDCPA suits that 

claim that the collectors’ validation notice is somehow confusing or 

misleading. Industry officials told us they believe that some consumer 

attorneys file FDCPA lawsuits largely for their own personal gain, taking 

advantage of the attorneys’ fees awarded under FDCPA for attorneys who 

prevail against collection agencies. Representatives of several debt 

collection companies told us that in many instances they choose to settle 

FDCPA cases even when they believe they have done no wrong to avoid 

the expense of bringing the cases to trial. 

FDCPA provides that collectors that violate the law are liable to an 

individual consumer for any actual damages suffered by the consumer, 

plus any additional damages allowed by the court, not to exceed $1,000 

per violation. The court also may award reasonable attorneys’ fees to a 

consumer who prevails in the action. Damages for class actions are set at 

the lesser of $500,000 or 1 percent of the debt collector’s net worth. In its 

2009 workshop report, FTC proposed that Congress, at a minimum, update 

these damages to reflect inflation since 1977.63 Some consumer attorneys 

with whom we spoke said the amounts were too low to serve as a 

meaningful deterrent for collection companies. In contrast, one industry 

representative expressed the view that the amounts paid for attorney fees 

often far exceed the damage award to the consumer, particularly for 

technical violations of FDCPA that, in their view, caused no actual 

consumer harm. 

FTC’s workshop report noted that lawsuits seeking to collect on credit 

card debt are usually filed in state court and, depending on the amount of 

the debt, may be filed either in small claims court or civil court of general 

jurisdiction. Courts typically apply state contract law to decide collection 

cases and use state rules of civil procedure and local court rules, the 

report noted, and state rules of civil procedure require that after filing the 

debt collector serve the debtor with notice of the action, which can 

Debt Collection Litigation 

 

63FTC, Collecting Consumer Debts: The Challenges of Change: A Workshop Report

(Washington, D.C., February 2009). 

Page 40 GAO-09-748 Credit Card Debt Collection
 

include the date and time the debtor must appear in court. If the debtor 

does not appear in court to respond to the lawsuit, the judge can generally 

enter a default judgment in favor of the creditor. Once the owner of a debt 

receives a favorable judgment, the owner can generally collect on that 

judgment or award, and in some states can seek to put a lien on the 

debtor’s property or garnish the debtor’s wages or bank accounts. 

While no national figures are readily available on the number of debt 

collection lawsuits filed in the United States—involving credit card or any 

other form of debt—the numbers are widely recognized to be very large. 

FTC’s 2009 workshop report noted that the majority of cases on many 

state court dockets on any given day are debt collection cases. A report by 

the Urban Justice Center estimated that in 2006, 320,000 debt collection 

cases were filed just in New York City’s Civil Court.64 In Chicago’s Cook 

County Circuit Court, more than 119,000 civil debt collection lawsuits 

were pending as of June 2008, according to a review by the Chicago 

Tribune. State officials in Ohio told us that municipal court judges there 

handle as many as 1,000 debt collection cases per week. A review by the 

Boston Globe found that at least 60 percent of small claims cases filed in 

Massachusetts in 2005 were filed by debt collectors. Consumer groups, 

attorneys, and FTC all acknowledge that the number of these state court 

cases has increased in recent years and is putting a strain on the state 

court systems. Kaulkin Ginsberg and the National Association of Retail 

Collection Attorneys have noted that the growth of the debt-buying 

industry has resulted in increases in collection lawsuits because entities 

that purchase delinquent debt often use collection law firms as their 

primary tool for recovery. 

FTC’s workshop report highlighted concerns related to the prevalence of 

default judgments in debt collection litigation. For example, in Cook 

County, Illinois, it is estimated that debt collectors obtained a default 

judgment in more than 45 percent of debt collection lawsuits filed in 2007. 

The Urban Justice Center estimated that 80 percent of the debt collection 

cases it reviewed for 2006 in New York City resulted in default judgments. 

When a consumer does not show up in court to respond to the suit, a 

default judgment generally may be entered against them. Consumer 

advocates and consumer attorneys have raised concerns that debt 

collectors often file suits with weak evidence supporting the alleged debt, 

 

64Urban Justice Center, Debt Weight: The Consumer Credit Crisis in New York City and 

Its Impact on the Working Poor (New York, N.Y., October 2007). 

Page 41 GAO-09-748 Credit Card Debt Collection
 

knowing that most likely the consumer will not appear in court and they 

will receive a default judgment. Moreover, advocates say consumers often 

do not appear to contest a debt collection lawsuit because they have not 

been properly served with notice of the lawsuit.65 In response to concerns 

about the number of default judgments, representatives of the debt 

collection industry say that in many debt collection cases, defendants may 

legitimately owe the debt but do not appear in court because they want to 

avoid the associated costs of offering a defense that they know will be 

unsuccessful. 

Representatives of the National Consumer Law Center, the National 

Association of Consumer Advocates, Consumer Union, and attorneys at 

legal aid clinics have stated that they have observed a number of other 

debt collection practices that raise concern. Because there is limited 

information about the extent to which these practices occur, most of the 

evidence remains anecdotal. 

Other Concerns 

• Collection of debt discharged in bankruptcy. Under the federal 

Bankruptcy Code, creditors are prohibited from taking any form of 

collection action on debts discharged in bankruptcy, including legal action 

and communications with the debtor, such as telephone calls and letters.66

As noted earlier, federal agencies have reached settlement with companies 

alleged to have engaged in collection activities on discharged debt. In 

addition, at least one debt buyer we identified purchases discharged 

bankruptcy debt. There may be instances in which debts that have been 

initially designated as discharged can later become collectable—such as 

cases where the courts discover additional assets that can be divided 

among creditors or where debtors may choose to repay discharged debts 

out of a sense of moral duty. However, some consumer representatives 

have expressed concerns that the purchase and sale of discharged debt 

may foster improper collection practices. 

 

65A party in a civil action is generally served (delivered) legal papers in lawsuits, either by 

mail or by a professional process server or a government official, such as a deputy sheriff, 

marshal, or constable. According to a press release, in April 2009, the New York State 

Attorney General filed criminal charges and a civil suit against a legal process server and its 

chief executive officer and president for allegedly failing to provide proper legal 

notification to thousands of New York residents facing debt-related lawsuits. See Office of 

the New York State Attorney General, “Attorney General Cuomo Announces Arrest of Long 

Island Business Owner for Denying Thousands of New Yorkers Their Day in Court,” 

http://www.oag.state.ny.us/media_center/2009/apr/apr14a_09.html (accessed July 1, 2009). 

6611 U.S.C. § 524. 

Page 42 GAO-09-748 Credit Card Debt Collection
 

• Collection of time-barred debt. As noted earlier, while it is generally illegal 

to sue or threaten to sue to recover debt that is beyond the statute of 

limitations (time-barred debt), FDCPA does not prohibit other attempts to 

collect on such debt, such as through telephone calls or letters. Some 

consumer advocates have reported to FTC that some collectors still make 

false threats of suit or actually sue on time-barred debts—and in some 

cases obtain a default judgment on time-barred debts from consumers who 

may be unaware that a collector may not lawfully sue on debt over a 

certain age. FTC addressed this issue in a recent roundtable it held in 

August 2009 on debt collection litigation and arbitration issues. FTC plans 

to hold two other roundtables on these issues later this year. 

• Revival of time-barred debt. Some consumer attorneys have also reported 

that some debt collectors have used unlawful tactics in an attempt to 

revive a time-barred debt—that is, to extend the time available to sue a 

debtor if the statute of limitations has past or is approaching. Consumer 

representatives have alleged that some companies have unjustly sought to 

extend the limitations period by altering a debt’s recorded delinquency 

date or by persuading consumers to make a very small payment or making 

unauthorized payments in the debtor’s name. 

Debts May Not Always Be 

Adequately Verified 

Having adequate information is a key element in ensuring a fair and 

efficient system for collecting debt. According to FTC and other 

stakeholders, collection agencies and debt buyers sometimes may not 

have adequate information about their accounts and may not always have 

access to documentation needed to verify the debt. 

The flow of information plays an important role in the process of debt 

collection. Credit card issuers provide their third-party collection agencies 

with information about the debtor—including name, address, telephone 

number, date of birth, Social Security number, and employer—and about 

the debt itself, including account number, balance, date of first 

delinquency, and date of charge off. Additional information that may be 

provided by issuers includes the last date of payment; a breakout of the 

principal, interest, and fees that compose the amount due; monthly 

payment date; minimum payment amount; and any notes describing the 

issuer’s internal collection efforts on the account. Some issuers allow 

third-party agencies to access account information through the issuer’s 

own data system during the collection process. 

Amount of Information 

Transferred to Collection 

Companies Varies 

FTC, state agencies, consumer advocates, and others have expressed 

concerns that debt collection companies sometimes have inadequate 

information about the accounts for which they are collecting—increasing 

Page 43 GAO-09-748 Credit Card Debt Collection
 

the likelihood that the collector reaches the wrong consumer or tries to 

collect the wrong amount. Consumer groups and others note that this 

problem appears to be most acute when debt is sold and the transfer of 

information between seller and buyer may not be complete. It is common 

for a debt buyer to receive only a computerized summary of the issuers’ 

business records, and the specific account data transferred to a debt buyer 

varies with each sale. Problems with the sufficiency of data that are 

transferred can be exacerbated when accounts are sold multiple times, 

and there are numerous areas in which account integrity could be 

compromised, according to industry data specialists with whom we spoke. 

For example, important account information—such as results of disputed 

account investigations, consumer complaints about billing errors, and 

information on settlement agreements and identity theft—may not always 

be transferred to debt buyers. 

To help improve information flows, FTC’s 2009 workshop report proposed 

that Congress modify FDCPA to require that the initial validation notices 

provided to consumers include three additional pieces of information. 

First, the agency recommended that validation notices notify consumers of 

two significant rights they have under FDCPA: the right to have collection 

efforts suspended prior to debt verification and the right to require 

collectors to cease contact upon written request.67 Second, FTC 

recommended that validation notices include the name of the original 

creditor. FTC and consumer groups have noted that this would benefit 

consumers as well as collectors by making it easier for consumers to 

recognize their debts when they have been sold to a debt buyer under a 

different name than that of the original creditor. Third, FTC recommended 

that validation notices include not just the total amount of the debt, but 

also an itemization of principal, interest, and fees, which it said would 

allow consumers to determine if any charges being demanded by a debt 

collector were erroneous or subject to dispute. 

A related area of concern has been the availability of account media—that 

is, billing statements, credit card agreements, card applications, or other 

 

67Specifically, FTC’s workshop report recommended that validation notices be required to 

inform consumers of their rights under (1) section 809(b) of FDCPA, which provides that if 

a consumer disputes a debt or requests verification of the debt in writing within 30 days of 

receiving the validation notice, the debt collector must suspend collection efforts until it 

obtains verification of the debt and mails it to the consumer; and (2) section 805(c) of 

FDCPA, which requires debt collectors to cease contacting a consumer about a debt if the 

consumer requests it in writing. 15 U.S.C. §§ 1692c(c) and 1692g(b).

Page 44 GAO-09-748 Credit Card Debt Collection
 

items that help substantiate the validity of the debt. Contracts between 

issuers and debt buyers usually specify the terms of the account media 

provided to the buyer. For example, in our discussions with issuers and 

debt buyers and our review of sample contracts, we found that oftentimes, 

buyers will have the right to request media either for a certain period of 

time subsequent to the purchase of a portfolio or for a certain number of 

accounts in the portfolio. Debt buyers may use such media to support a 

lawsuit or to address a consumer dispute. Some contracts between 

primary debt buyers and secondary debt buyers provide that if the 

secondary debt buyers request account media, the primary debt buyers 

will attempt to obtain them from the original creditor. Similarly, contracts 

between secondary debt buyers and tertiary debt buyers provide that the 

tertiary buyer can request media from the secondary buyer—which then 

requests them from the primary buyer, which requests them from the 

issuer (see fig. 3). 

Figure 3: How Account Information Is Passed among Debt Buyers 

Source: GAO.

Credit

card

issuer

First

buyer

Second

buyer

Third

buyer

Current owner of debt submits request for account media

(such as billing statements, cardmember agreements, card 

applications) to the previous owner. The request is passed along until it 

reaches the issuer. A

Media

request

Upon request, issuer provides account 

media to the initial debt buyer, who passes

it on to subsequent buyers until it reaches

the current owner.

B

Media

This process can be problematic because if any company in the chain fails 

to respond (or goes out of business), it can be difficult to obtain the media 

needed to document and verify an account. The credit and collection 

industry trade association ACA International has suggested that Congress 

require by statute that creditors and debt buyers maintain specific account 

Page 45 GAO-09-748 Credit Card Debt Collection
 

documentation until the time they sell, forward, or assign a debt to 

another entity, at which time the documentation would be required to be 

made available to that entity. 

Some industry representatives have noted that improving information 

flows in the debt collection process would have costs as well as benefits. 

For example, they note that requirements for maintaining and transferring 

media (such as credit card agreements) for all accounts would impose 

financial costs to creditors and collectors. Moreover, industry 

representatives say that the need for account media is relatively rare—for 

example, one collection attorney estimated that such media from issuers 

or previous debt buyers would be relevant to fewer than 1 percent of his 

firm’s collection disputes. In addition, representatives of the credit card 

industry have said that the transfer of more account information can raise 

privacy and data security concerns—for example, by allowing more 

parties to hold sensitive account information there may be an increased 

risk for data breaches and identity theft. While these issues would need to 

be considered, FTC and consumer advocates maintain that it remains 

important nonetheless to find ways to better ensure that debt collectors 

have adequate information about the accounts for which they are 

collecting. 

FDCPA requires that, if a consumer disputes the validity of a debt in 

writing, the debt collection agency must provide the consumer with 

documented verification of the debt.68 However, the statute does not 

precisely set out what constitutes verification of the debt. Collection 

companies’ policies for responding to requests for verification vary. In 

many cases, contracts between issuers and collection agencies stipulate 

how the agency responds to requests for verification. FTC, consumer 

advocates, and state agencies have said that, in practice, many debt 

collectors and debt buyers do very little to verify debts that consumers 

dispute. In particular, they say that the verification provided by debt 

buyers sometimes consists of little more than a written statement that the 

amount being demanded is what the creditor claims is owed. Collection 

agencies’ ability to provide adequate documentation to verify a debt may 

be limited if they do not have access to account media, as is sometimes the 

case. 

Adequacy of Verification Has 

Been a Concern 

 

68DBA International stated that, in practice, many debt buyers provide verification to 

consumers who dispute a debt even when the dispute is oral or is not received within the 

30-day period required under FDCPA. 

Page 46 GAO-09-748 Credit Card Debt Collection
 

Debt collection industry representatives claim that considerable confusion 

exists about what constitutes adequate verification under FDCPA, and 

collectors largely have had to rely on case law. In one key case, the Fourth 

Circuit of the U.S. Court of Appeals found in 1999 that while the debt 

collector must obtain verification from the creditor for the amount 

demanded, the collector is not required to keep detailed files of the alleged 

debt.69 To clarify and improve the debt verification process, FTC’s 2009 

workshop report proposed that FDCPA be amended to require debt 

collection agencies to conduct reasonable investigations that are 

responsive to the specific disputes consumers have raised. FTC points out 

that such a requirement would be comparable to the “reasonable 

investigation” standards for addressing consumer disputes that are 

imposed by FCRA and Regulation Z, which implements the Fair Credit 

Billing Act.70 FTC officials told us that what constitutes a reasonable 

investigation would depend on the specific facts of the dispute, including 

the type of debt and the cost of obtaining information. Some debt 

collection industry participants say that because the circumstances of a 

dispute can vary, any new statute or implementing regulations should 

avoid requiring a specific checklist of items required for verifying a debt. 

However, in general, FTC, consumer representatives, and industry 

participants agree that clarification is needed on what constitutes 

adequate verification of a debt under FDCPA. 

Most Stakeholders Believe 

That FDCPA Needs 

Updating 

FDCPA was enacted in 1977. While some sections have been amended, it 

has not been substantially revised to reflect changes that have occurred in 

technology and in the debt collection marketplace. Most stakeholders 

involved in the process of debt collection with whom we spoke—

representing consumers, state and federal agencies, credit card issuers, 

debt collectors, and debt buyers—have expressed support for updating 

FDCPA. 

Communication technologies that are ubiquitous today—mobile 

telephones, e-mail, caller identification, answering machines, and fax 

machines—were not prevalent when FDCPA was enacted in 1977. 

Collection companies sometimes have faced difficulties in trying to use 

these technologies while remaining in compliance with the act: 

FDCPA Does Not Address 

Some Key Modern 

Technologies 

 

69Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999). 

7015 U.S.C. §§ 1681s-2, 1666: Regulation Z, 12 C.F.R. § 226.13(f) (2009). 

Page 47 GAO-09-748 Credit Card Debt Collection
 

• Answering machines and voice mail. FDCPA requires that a collection 

agency identify itself as such to a debtor and also not state that a debtor 

owes any debt to any other party who might answer the telephone.71 A 

debt collector may violate FDCPA if the collector leaves a message on a 

consumer’s answering machine or voice mail that fails to disclose that the 

collector is calling in an attempt to collect a debt. However, the debt 

collector may also violate FDCPA if someone other than the debtor 

overhears a telephone recording revealing the debt collection effort. One 

court acknowledged the difficulty a debt collector has in complying with 

all of the provisions of FDCPA at the same time when leaving voice mail, 

and inferred that debt collectors may need to reach debtors by postal mail, 

in-person contact, or by speaking directly to them via telephone instead of 

using voice mail.72

• Mobile telephones. FDCPA restricts the hours in which debt collectors can 

call consumers and prohibits collectors from imposing additional 

telephone charges on consumers. However, because mobile telephone 

users may not be, at a given time, in the geographic location indicated by 

the telephone’s area code, debt collectors calling a mobile telephone 

cannot be certain they are calling within the permitted hours. 

Furthermore, unlike users of land lines, mobile telephone users often 

incur charges of some sort whenever they receive a call. 

• Caller identification. When debt collectors call consumers who have 

caller identification on their telephones, the collectors may be disclosing 

their names and telephone numbers, which could be construed as a 

violation of FDCPA if a third party sees that a debt collector is calling. 

However, some stakeholders have questioned if conveying false or 

blocked information through caller identification would be a violation of 

FDCPA’s and the FTC Act’s prohibitions on making a false or misleading 

representation, as well as FDCPA’s prohibition of making telephone calls 

without meaningful disclosure of the caller’s identity. 

• E-mail and faxes. Debt collection agencies have been reluctant to use email and faxes to communicate with debtors because of the risk that 

someone other than the debtor may read the transmission, which could 

violate FDCPA’s prohibition on disclosure to third parties. 

 

7115 U.S.C. §§ 1692c(b), 1692e(11). 

72Berg v. Merchants Ass’n Collection Div., Inc., 586 F. Supp. 2d 1336, 1344 (S.D. Fla. 2008). 

Page 48 GAO-09-748 Credit Card Debt Collection
 

• Predictive dialers. Predictive dialers—which are used heavily in the debt 

collection industry to efficiently manage high call volumes—sometimes 

can result in inadvertent hang-ups or dead air, which could be a violation 

of FDCPA’s prohibition on causing a telephone to ring repeatedly with 

intent to annoy, abuse, or harass a consumer.73

Because FDCPA does not address these technologies, collectors often 

have had to rely on case law to determine their appropriate use, and this 

has created challenges for debt collection industry participants wanting to 

comply with the law. In a comment letter to FTC, ACA International stated 

that “[c]onflicting court decisions make it challenging to comply with all 

applicable laws” and that without guidance on the application of FDCPA 

to these new methods of communication, debt collectors are without a 

reference point to assess the legality of using these technologies to 

communicate with consumers. Similarly, the National Association of Retail 

Collection Attorneys noted in a comment letter that “conflicting court 

decisions have made regulatory compliance a guessing game, rather than a 

predictable endeavor.” 

FDCPA requires FTC to provide Congress with an annual report 

describing its FDCPA enforcement efforts and provide any 

recommendations for statutory changes. However, FDCPA does not 

authorize FTC or any other agency to issue rules to implement the act.74

The legislative history of the act indicates that rulemaking authority was 

not provided to any agency because the relevant committee regarded the 

legislation as comprehensive and believed it would fully address all 

collection abuses.75 However, because no administrative agency can 

promulgate rules for FDCPA, limited means exist for clarifying ambiguities 

or filling gaps in the statute and addressing issues that arise as technology 

and the marketplace evolve. As we have seen, the advent of the debtbuying industry has created new challenges with regard to information 

flows that were not envisioned when FDCPA was drafted. FTC officials 

noted that if FDCPA were amended to require collectors to respond to 

consumer disputes with reasonable verification measures, a rulemaking 

would be the appropriate method for determining what constitutes a 

FTC Lacks Rulemaking 

Authority for FDCPA 

 

7315 U.S.C. § 1962d(5). 

7415 U.S.C. § 1692l(d) specifically prohibits FTC and other agencies from promulgating 

rules concerning the collection of debts by debt collectors. 

75S. Rep. No. 95-382, at 6 (1977). 

Page 49 GAO-09-748 Credit Card Debt Collection
 

“reasonable” verification process. Similarly, FTC and some industry 

representatives note that rulemaking authority would allow the agency to 

address current and future technologies in the marketplace. 

Representatives of some consumer groups and state agencies told us that 

they support providing FTC with rulemaking authority for FDCPA. Among 

debt collection trade associations, the National Association of Retail 

Collection Attorneys has supported giving FTC rulemaking authority, 

which it says would help resolve potentially conflicting court 

interpretations and help ensure industry compliance. ACA International 

has not explicitly called for amending FDCPA to give FTC rulemaking 

authority, but has recommended that FTC “make regulatory changes” as it 

deems necessary. Officials from DBA International, a trade association for 

debt buyers, told us it had not taken a position on FTC rulemaking 

authority. FTC already has rulemaking authority to implement other 

consumer protection statutes—for example, the agency issued the 

Telemarketing Sales Rule in 1995, revised in 2003, to respond to changes in 

telephone technologies and the marketplace. FTC has issued four FDCPA 

“advisory opinions,” which protect debt collectors from liability for 

actions taken in good faith reliance on the opinions.76 In addition, FTC 

staff have issued a commentary on FDCPA and also have issued a number 

of “staff opinions,” but the commentary and these opinions are not legally 

binding and have not always carried much weight in the courts, according 

to FTC staff. As a result, debt collectors have often had to rely on case 

law—which they note has sometimes been ambiguous or contradictory—

in interpreting how to comply with FDCPA, and there has been no 

regulatory process to help address the changing marketplace for debt 

collection. 

The rise in credit card delinquencies and charge offs that has accompanied 

the current economic recession has focused new attention on the 

practices of creditors and third-party companies in collecting on 

delinquent credit card debt. FDCPA, enacted in 1977, has been an 

important tool in addressing unfair third-party debt collection practices, 

but it has not kept up with the evolving marketplace or with changes in 

technology, and FTC has previously recommended that Congress make 

certain changes to the statute. We believe that in at least three areas, 

Conclusions 

 

7615 U.S.C. §1692k(e). 

Page 50 GAO-09-748 Credit Card Debt Collection
 

FDCPA would benefit from modification to provide needed clarity for 

industry and to enhance consumer protections. 

First, FDCPA is limited in addressing problems associated with 

information flows. With the advent of debt buying has come the repeated 

resale of accounts—making it more difficult to verify debts and obtain 

appropriate documentation as credit card accounts get further from their 

original owner. FDCPA does not, for example, address the account 

information that should be provided when a debt is sold nor does it 

address the procedures and information that constitute “verification” of 

the debt. Statutory changes to better address these issues could help 

ensure that participants in the debt collection industry have clear 

guidelines on what information they must provide to each other and to 

consumers, and could help reduce instances where collectors seek 

payment from an incorrect party or for an incorrect amount. 

Second, because FDCPA was enacted prior to the advent of technologies 

such as mobile telephones, e-mail, and voice mail, its provisions on 

communicating with consumers are outdated. This has resulted in 

considerable ambiguity and confusion on using these technologies in 

compliance with the law, and collection companies have been reluctant to 

use some modern technologies. Statutory changes to ensure technology 

issues are addressed could benefit both industry and consumers, allowing 

the industry to more efficiently conduct its operations and consumers to 

receive information expeditiously and with appropriate protections. 

Finally, because FTC does not have rulemaking authority under FDCPA, 

there is no regulatory process to keep up with an evolving marketplace 

and changes in technology. With rulemaking authority, FTC could better 

regulate the practices of debt collectors and ensure that consumers are 

protected from unfair and abusive practices. 

To help ensure that the debt collection system better protects consumers 

without unduly burdening the legitimate process of collection, Congress 

should consider modifying the Fair Debt Collection Practices Act to 

account for changes in the marketplace that have occurred in recent years. 

Among such modifications, Congress should consider, in particular, 

options for modifying FDCPA to 

Matter for 

Congressional 

Consideration 

• help ensure that debt collectors and debt buyers have adequate 

information about the debts transferred and adequate documentation to 

verify the debts they seek to collect from consumers, 

Page 51 GAO-09-748 Credit Card Debt Collection
 

• reflect technologies that were not prevalent when the act was originally 

enacted, and 

• provide FTC with the authority to issue rules to implement the act. 

We provided a draft of this report to FDIC, Federal Reserve, FTC, OCC, 

and OTS for comment. FDIC, Federal Reserve, FTC, and OTS provided 

technical comments that we incorporated as appropriate. In addition, 

FDIC and FTC provided written responses, which are reprinted in 

appendixes II and III, respectively. In its response, FDIC noted that it 

takes seriously its responsibilities to enforce consumer protection laws 

and regulations related to debt collection and that it has taken formal 

enforcement actions and assessed civil money penalties against financial 

institutions to address noncompliance with these laws and regulations. In 

FTC’s response, it noted that its February 2009 workshop report, 

Collecting Consumer Debts: The Challenge of Change, concurred with our 

view that Congress should consider amending FDCPA to give FTC the 

authority to issue implementing rules. 

As agreed with your offices, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days from the 

report date. At that time, we will provide copies to other interested 

congressional committees, as well as the Chairman of the Board of 

Governors of the Federal Reserve System, the Chairman of the Federal 

Deposit Insurance Corporation, the Chairman of the Federal Trade 

Commission, the Comptroller of the Currency, and the Acting Director of 

the Office of Thrift Supervision. In addition, the report will be available at 

no charge on GAO’s Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made key contributions to this report are 

listed in appendix IV. 

Agency Comments 

Alicia Puente Cackley 

Director, Financial Markets and 

 Community Investment 

Page 52 GAO-09-748 Credit Card Debt Collection
Appendix I: Objectives, Scope, and 

Methodology 

Page 53 GAO-09-748 

Appendix I: Objectives, Scope, and 

Methodology 

Our report objectives were to examine (1) the protections provided 

consumers under federal and state laws related to credit card debt 

collection, and the roles and responsibilities of federal and state agencies 

in enforcing these laws; (2) the processes and practices involved in 

collecting and selling delinquent credit card debt; and (3) any issues that 

may exist related to some of these processes and practices. The focus of 

our report was on the collection of consumer credit card debt as opposed 

to other forms of debt. However, because collection agencies may collect 

on multiple kinds of debt, it was not always possible to isolate debt 

collection processes related specifically to credit card debt. We indicate in 

the report whether data that we present are specific to credit card debt or 

may include other types of debt. Our report also focuses on the largest 

credit card issuers and debt collection companies that ranged in size from 

medium to very large; therefore, the collection processes and practices 

described in this report may not be representative of smaller credit card 

issuers or debt collection companies. 

To address our first objective, we reviewed and analyzed relevant federal 

laws, rules, and guidance and we interviewed officials from the Federal 

Trade Commission (FTC) and the federal depository institution 

regulators—Board of Governors of the Federal Reserve System (Federal 

Reserve), Federal Deposit Insurance Corporation (FDIC), Office of the 

Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), 

and the National Credit Union Administration. We reviewed the 

procedures the federal regulators use in their bank examinations to review 

issuers’ debt collection policies and practices. We also reviewed two 

compendiums that summarized state laws applicable to debt collection—

the National Consumer Law Center’s Fair Debt Collection and Collection 

Actions legal practice guides and ACA International’s Guide to State 

Collection Laws and Practice. We did not conduct our own review of all 

state fair debt collection statutes, but we did review the statutes of 

selected states—California, Colorado, Massachusetts, and Texas—which 

we selected because they included provisions that differed in some ways 

from the Fair Debt Collection Practices Act. We interviewed staff with the 

office of the attorney general in these four states and relied upon them for 

the analysis of and information about the meaning and scope of their state 

debt collection laws. In addition, we conducted a group interview, 

coordinated by the National Association of Attorneys General, with staff 

from the office of the attorney general of 15 additional states who chose to 

participate. We also met with staff from state and local agencies 

responsible for regulating the collection industry in a group meeting that 

was coordinated by the North American Collection Agency Regulatory 

Association to learn about state and local agencies’ activities, roles, and 

 Credit Card Debt Collection 
Appendix I: Objectives, Scope, and 

Methodology 

responsibilities. Seventeen of the group’s 24 U.S. members elected to 

participate in this meeting. 

To address our second objective, we interviewed representatives of the six 

largest credit card issuers as measured by total outstanding credit card 

loans, as of December 31, 2007, in the Card Industry Directory.1

 These 

issuers, which represented about 83 percent of total outstanding U.S. 

credit card debt, were American Express, Bank of America, Capital One 

Financial Corp., Citigroup Inc., Discover Financial Services Inc., and 

JPMorgan Chase & Co. We reviewed the internal collection department 

policies of one issuer and the internal collection training materials used by 

three issuers, as well as several sample contracts between issuers and debt 

collection agencies and between issuers and debt buyers. We also 

reviewed the Securities and Exchange Commission filings of selected 

issuers and publicly held debt collection companies. In addition, we met 

with six third-party debt collection agencies, six companies that purchase 

credit card debt, one law firm that specializes in debt collection, and one 

collection attorney. We chose these entities because some or a significant 

portion of their business included the collection or purchase of credit card 

debt and because they ranged in size from medium to very large. These 

companies included some of the largest industry players, although data are 

not available on the share of the respective markets that they represent. 

We made several attempts to meet with at least one small debt collection 

agency—fewer than 20 employees—but were unsuccessful in gaining the 

cooperation of any such companies that we contacted. Additionally, we 

met with trade associations that included ACA International (which 

represents creditors, third-party collection agencies, collection attorneys, 

and debt buyers), DBA International (which represents debt buyers), the 

National Association of Retail Collection Attorneys, the American Bankers 

Association, and the Consumer Data Industry Association (which 

represents consumer reporting agencies). We also reviewed the guidance 

and other information that ACA International provides to its members. 

Finally, we toured the collection facilities of one card issuer and one large 

debt collection agency and listened in on a number of calls to consumers 

made by collections staff. 

To address our third objective, we reviewed FTC’s annual reports to 

Congress on the Fair Debt Collection Practices Act from 1998 to 2009, as 

 

1

Card Industry Directory: The Blue Book of the Credit and Debit Card Industry in North 

America, 20th ed. (Chicago, Ill., 2008). 

Page 54 GAO-09-748 Credit Card Debt Collection
Appendix I: Objectives, Scope, and 

Methodology 

well as its consumer education materials and other relevant documents. 

We also reviewed the transcript, report, and public comments resulting 

from the workshop on debt collection that FTC hosted in October 2007.2

We obtained and analyzed consumer complaint data from 2004 to 2008 

that FTC maintains in its Consumer Sentinel database. Additionally, we 

reviewed all of the enforcement actions that FTC filed against debt 

collection agencies from 1998 to 2008 and examined their associated 

complaints, press releases, consent orders and agreements, and 

permanent injunctions. We did not include cases that clearly did not 

involve debt specific to credit cards. However, sometimes the type of debt 

involved could not be determined from the documents, and in those cases 

we included the case but specified that it was not known if credit card 

debt was involved. We also received information from the Department of 

Justice’s U.S. Trustee Program on its role in taking enforcement action 

related to the collection of credit card debt in cases involving bankruptcy 

filings. In addition, we collected and analyzed data from FDIC, Federal 

Reserve, OCC, and OTS on consumer complaints submitted in 2004-2008 

related to credit card issuers’ debt collection activities. We also gathered 

information from these agencies on the informal and formal enforcement 

actions, if any, they had taken against issuers for violations identified 

during bank examinations in 1999-2008. We reviewed bank examination 

reports and relevant documents associated with enforcement actions, 

such as orders to cease and desist. We did not gather complaint data or 

information on enforcement actions from the National Credit Union 

Administration because officials told us credit unions represent a very 

small share of the credit card market. To assess the reliability of FTC’s 

Consumer Sentinel database as well as the consumer complaint data 

provided by the four federal depository regulators, we reviewed these data 

for obvious errors in consistency and completeness and we interviewed 

agency staff responsible for maintaining the data. We determined that the 

data were sufficiently reliable for the purposes of this report. However, 

complaint data may both over- and underestimate the number of actual 

problems in the industry because complaints may not be accurate or they 

may not represent a law violation. Consumer complaints are also selfreported and there are likely to be a number of complaints that are 

unreported. 

 

2

Federal Trade Commission, Collecting Consumer Debts: The Challenges of Change: A 

Workshop Report (Washington, D.C., February 2009). 

Page 55 GAO-09-748 Credit Card Debt Collection
Appendix I: Objectives, Scope, and 

Methodology 

We identified enforcement actions related to debt collection at the state 

level by reviewing the National Association of Attorneys General’s 

biweekly Consumer Protection Reports from January 2006 through May 

2009, which compile information on state and federal enforcement of 

consumer protection laws, legislative initiatives, and consumer education 

efforts. These reports may not be representative of all state attorney 

general enforcement actions because they are a compilation of press 

releases from their offices’ Web sites, not all of which may publish such 

press releases. To the extent feasible, we identified those enforcement 

actions related to credit card debt and, as available, reviewed related press 

releases and other documents. We also reviewed and analyzed consumer 

complaint data related to debt collection agencies that had been collected 

by the national Better Business Bureau and the National Association of 

Attorneys General. We reported these data because they provided 

information relevant to our review, but we did not test the reliability of 

these data because they appeared to corroborate FTC’s consumer 

complaint data. We also reviewed studies and reports by consumer 

organizations, such as the Urban Justice Center and Public Citizen, related 

to debt collection. In addition, we met with attorneys who represent 

consumers in debt collection cases and with representatives of consumer 

organizations, including the National Consumer Law Center, Consumers 

Union, and the National Association of Consumer Advocates. 

Because the debt collection industry is mostly composed of privately held 

companies, the amount of publicly available data about the industry is 

limited. To identify information on the industry, we conducted a literature 

search and we talked with a researcher from the Federal Reserve Bank of 

Philadelphia and officials from ACA International and DBA International, 

as well as other industry participants. We reviewed two industry surveys 

commissioned by ACA International, as well as reports published by 

Kaulkin Ginsberg and the Nilson Report. To determine the reliability of 

industry data in the Kaulkin Ginsberg reports, we interviewed company 

representatives about their methodology. They told us their estimates are 

developed from discussions with industry participants, financial 

statements, and other data obtained in the firm’s capacity as an industry 

advisor. We could not assess the reliability of the firm’s data, but our 

review of its methodology indicates that their data may not be 

representative of the entire debt collection industry. Officials from the 

Nilson Report declined our request to discuss the methodology used in 

their reports. We reviewed the descriptions of the survey methodologies 

contained in the ACA reports and determined that while their 

methodology was generally sound, because of the low response rate and 

the absence of nonresponse bias analysis, and the wide confidence 

Page 56 GAO-09-748 Credit Card Debt Collection
Appendix I: Objectives, Scope, and 

Methodology 

intervals around key estimates due to the small number of responses, the 

resulting survey data may not be reliable for making precise quantitative 

estimates. However, we report some of the results from these reports 

because limited other publicly available sources of such data exist. During 

the course of our review, we also found several companies on the Internet 

that said they provided debt collection industry research and statistics for 

a fee, but we did not pursue these because their methodology suggested 

they faced potentially severe risks to reliability. 

We conducted this performance audit from July 2008 to September 2009 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. 

Page 57 GAO-09-748 Credit Card Debt Collection
Appendix II: Comments from the Federal Appendix II: Comments from the Federal Deposit Insurance Corporation 

Deposit Insurance Corporation 

Page 58 GAO-09-748 Credit Card Debt Collection 
Appendix III: Comments from the Federal Appendix III: Comments from the Federal Trade Commission 

Trade Commission 

Page 59 GAO-09-748 Credit Card Debt Collection
Appendix III: Comments from the Federal 

Trade Commission 

Page 60 GAO-09-748 Credit Card Debt Collection
Appendix IV: 

A

GAO Contact and Staff 

cknowledgments 

Page 61 GAO-09-748 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

Alicia Puente Cackley, (202) 512-8678 or cackleya@gao.gov

In addition to the contact named above, Jason Bromberg (Assistant 

Director), Anthony Bova, Christine Houle, Tiffani Humble, Marc Molino, 

Carl Ramirez, Linda Rego, and Barbara Roesmann made key contributions 

to this report. 

 Credit Card Debt Collection 

GAO Contact 

Staff 

Acknowledgments 

(250403) 
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