The Federal Trade Commission (FTC) last week put out a call for public comment in advance of its two-day workshop on debt collection litigation and arbitration practices to be held in early August.

The FTC will be hosting a workshop in Chicago ” formally titled Protecting Consumers in Debt Collection Litigation and Arbitration: A Roundtable Discussion ” to deliberate policy problems surrounding the accounts receivable management industrys use of the legal system. The event, scheduled for August 5-6, will be the first in a series on the topic, according to the FTC.

The event follows up on the FTCs February 2009 Report, Collecting Consumer Debts: The Challenges of Change ” A Workshop Report, which suggested that the debt collection managerial system in the U.S. should be changed and revamped. The report also disclosed that the FTC would hold regional roundtables to help develop policy suggestions related to debt collection litigation and arbitration proceedings against individual consumers. The Chicago event, hosted on the campus of Northwestern University Law School, will be the first of these roundtable conversations for state court judges, government officials, debt collectors, consumer advocates, academics and other stakeholders.

Any party interested in posting written comments or original research on the subject should do so before August 1st. Comments can be sent in electronically through the FTCs Web site. The workshop is free and open to the public.

Earlier this year, the FTC noted in its FDCPA report that laws and regulations that govern debt collection process should be addressed and even modified. But because of limited information, the FTC would need to convene additional meetings to actualize a policy recommendation.

It is vague what current practices the FTC is looking to alter or what direction its policy might head. In the 4 months since the committee released its proposal on the FDCPA, there have been significant changes. For example, one of the main recommendations saw the FDCPA continuing to be administered by the FTC. But recently, there have been calls for a new consumer protection agency to take responsibility for debt collection laws.

The first call came in late April. Megan Duffy, a 21-year-old college student, answered the phone at her parents’ home in Belmar, N.J., and heard the voice of a debt collector. With just one credit card and a few hospital bills to pay off, she wasn’t bothered. For Duffy and other New Jersey residents who feel bothered by debt collectors, relaxation could be on the way. An Assembly committee on June 4 accepted the New Jersey Fair Debt Collection Practices Act, which would expand a 1977 federal law and give victims of harassment access to help at the state level. “New Jersey’s long overdue to come up with a state statute,” Burzichelli said. The bill would more strictly regulate the communication debt collectors can have with debtors, and dictate harsher penalties on violators.

Supporters of the bill say abusive debt-collection practices, for example repeated phone calls, falsifications, calls at work, calls to employers and family members – is unnecessary and need to be dealt with at the state level. Under the proposed law, debt collectors could not threaten criminal proceedings or other legal action unless they intend to follow through. “It’s obvious that I’ve never talked to a debt collector”. . . . The caller, she said, badgered her to have a friend or family member pay her debt. The bill imposes a maximum penalty of $10,000 for the first offense and a maximum of $20,000 for the second, a provision consumer-law experts say would make the proposed legislation one of the strictest state laws in the nation.

Fair-practice laws on debt collection is different from state to state. According to David Szuchman, director of the New Jersey Division of Consumer Affairs, the designed legislation is desperately needed in New Jersey. At the June 4 Assembly Consumer Affairs Committee hearing, Szuchman said 787 debt-collection complaints had come through the division last year, 368 for alleged harassment. In 2007, the division received 753 complaints. “New Jersey’s consumers deserve better. Nationally, complaints about the behavior of debt collectors have spiked with the recession.

Sergei Lemberg, who specializes in consumer law at the Connecticut firm Lemberg & Associates, said the current number of debt-collector cases was “tremendous.” “There’s a fresh group of people who have never had problems with credit before,” Richter said. “All of a sudden, the debt collectors know those are good targets for them to harass and abuse.” In its 2009 report to Congress, the FTC noted an increase in national consumer complaints about in-house and third-party debt collectors from 2007 to 2008.

In 2008, 34.7 % of the complaints were accusations of harassment by collection agents, compared with 19.7 percent in 2007. Debt-collection agencies say enough is being done at the federal level. In addition to over regulating agencies, Gambarella said, the bill has several disputable parts, such as its provision for punitive damages awarded to victimized debtors. Other critics, including the New Jersey Business and Industry Association, say the law would make it more challenging for a company to follow existing regulations, as laws vary from state to state.

Lemberg said his firm managed 50 to 100 debt-collection cases a month. The most average problems clients come to him with are debt collectors who threaten arrest or legal action, make repeated calls at work, call family members and employers, or misrepresent themselves on the phone. Debt collectors often threaten to send a law official to a debtor’s home, for example, which Lemberg said is not only a complete bluff, as someone cannot be arrested for not paying a private debt, but also illegal. “Most people are completely and entirely clueless,” Lemberg said. Burzichelli said his bill was in no way intended to erase or forgive a debt.