Digital debt collection

Abstract

This chapter aims to analyze the impact of digitalization of nonjudicial debt collection on consumer-debtor protections, using as an example the federal Fair Debt Collection Practices Act (FDCPA) in the United States of America (US). It introduces the reader to the “classic” concept of debt collection, the policies behind the FDCPA, and the protections granted by the US Congress to consumer-debtors against abusive debt collection practices, focusing on three aspects: the protection of debtor’s privacy, the ban of misleading and abusive practices, and the right of the consumer-debtor to dispute the debt. It then presents the concept of digital debt collection and shows how technological innovation is used by the debt collection industry to circumvent the law and bypass the statutory protections of the FDCPA. Using specific examples from practice and patent descriptions of debt collection software, the paper argues that digital debt collection reverses the communication pattern assumed by the FDCPA, overturns the consumer’s privacy rights, turns the validation of the debt into a public exercise, and misleads consumers into sharing more data than they should. The paper concludes that the FDCPA is too static and ill-equipped to adequately protect consumers against the challenges posed by the digital age, thus requiring amendments and improvements.