Debt collection is an interesting but under-explored area of business ethics. In the U.S., debt collection practices are regulated directly by the Fair Debt Collection Practices Act, but also indirectly by the Fair Credit Reporting Act and the various Bankruptcy Acts. Here, the U.S. Consumer Financial Protection Bureau reached settlement with the two largest debt buyers in the U.S. over allegations that they used deceptive practices in their attempts to collect often unenforceable debts. This could be used in the classroom alongside Albert Carr’s famous 1968 Harvard Business Review article, “Is Business Bluffing Ethical?“, to probe the limits of ethically permissible deception. The piece could also be used alongside Elizabeth Anderson’s 2004 Ethical Theory & Moral Practice article, “Ethical Assumptions in Economic Theory: Some Lessons from the History of Credit and Bankruptcy,” to unearth the ethical values underlying historical and contemporary attitudes toward the ethics of indebtedness. >>>
LINK: The Country’s Two Largest Debt Buyers Must Refund Consumers $61M Over Illegal Collection Practices (by Ashlee Kieler in Consumerist)
According to the CFPB consent orders, San Diego-based Encore – the largest debt buyer and collector in the U.S. – and Norfolk, VA-based Portfolio Recovery Associates – the second largest debt buyer and collector in the country – purchased more than $200 billion in delinquent or charged-off debts related to credit cards, phone bills, and other accounts that were often inaccurate, lacking documentation, or unenforceable.
According to the CFPB, both companies allegedly used “affidavits that misrepresented that the affiants had reviewed original account-level documentation confirming the consumers’ debts when they had not. The companies also submitted affidavits with documents attached that they claimed were the consumers’ specific account contracts or records when they weren’t.”
In some cases, the companies sued or threatened to sue consumers past the statute of limitations.
What do you think?