A recent Federal Trade Commission (“FTC”) settlement with debt buyer Asset Acceptance Capital Corp. is the latest of several actions against companies that profit from consumers in financial distress. The settlement illustrates the type of pro-consumer disclosures we expect the FTC to demand in connection with investigations and enforcement actions going forward. We also expect the new federal Consumer Financial Protection Bureau (“CFPB”) to follow this course through industry specific regulations for debt collectors and debt buyers that are on the horizon.

Asset Acceptance purchases old debts from companies at a fraction of the face amount and then attempts to profit by collecting on those debts. Under the settlement, the company has agreed to pay a $2.5 million civil penalty to settle FTC charges that it made misrepresentations when trying to collect old debts, including failure to inform consumers when a legal action to enforce the debt would be time-barred. The settlement requires that, after a consumer disputes the accuracy of a debt and before the debt buyer places the debt on a consumer’s credit report, the debt buyer must investigate the dispute and ensure it has a reasonable basis to claim the consumer owes the debt. The proposed order also bars the company from placing debt on consumer credit reports without notifying the consumer about the negative report.

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