Republished from ABA's Business Law Today, March 2013

Prior to the enactment and implementation of Title X of the Dodd-Frank Act (Pub. L. No. 111-203, 124 Stat. 1376 (2011)), the actions of the nation's large debt collectors had been governed by federal statutes, but debt collectors had never been subject to direct supervision by the federal government. The Federal Trade Commission (FTC) had enforcement authority under the federal Fair Debt Collection Practices Act (FDCPA), codified at 15 U.S.C. § 1692, et seq., but the agency exercised that authority rarely. Thus, the primary legal risk to collectors under federal law was consumer lawsuits brought under the FDCPA. This risk was quite real, with recent estimates from a company tracking FDCPA litigation showing that there were 11,495 FDCPA lawsuits filed in 2012. See FDCPA and Other Consumer Lawsuit Statistics, Dec. 16-31 & Year-End Review, 2012, WebRecon, available at http://dev.webrecon.com/for-immediate-release-fdcpa-and-other-consumer-lawsuit-statistics-dec-16-31-year-end-review-2012/ (Jan. 17, 2013). While this number indicates a 7 percent decline from 2011, it is still 311 percent higher than the number of lawsuits filed in 2004. These cases are fueled by the FDCPA's civil liability provision, which allows a plaintiff to recover $1,000 in statutory damages from any collector found in violation of the statute, as well as actual damages and attorney's fees. Additionally, the FDCPA contains a class action remedy, allowing a consumer to recover up to $500,000 on behalf of other consumers, or 1 percent of the net worth of the debt collector. With a collector only permitted to recover attorney's fees for a lawsuit filed in "bad faith and for the purpose of harassment," consumers filing FDCPA actions are met with a "low risk, high reward" scenario that has encouraged litigation.

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