Consumers who owe a significant amount of money on their credit cards may think about taking steps to consolidate debt rather than face the calls of a collection agency. At least that seems to be the consensus of officials with the Federal Trade Commission. The Wall Street Journal recently reported that the commission is requesting that states change their laws and arbitration rules regarding consumer debt-collection disputes. According to the FTC, the systems in place for handling collection disputes is broken, and weighs far too heavily in favor of creditors, putting too much pressure on debtors. Consumers who work with debt consolidation programs, though, might be fortunate enough to avoid debt-collection disputes entirely.
Collection Activity Rising
The Wall Street Journal reported that the number of debt-collection disputes is rising. This isn’t surprising. The national unemployment rate is still near 10 percent. A lot of people, then, are either out of work or working jobs that don’t pay them nearly enough. These people are likely to fall into debt. And when they can’t pay this debt, the collection agencies come calling. The FTC says that consumer complaints about third-party and creditor debt collection ranked as the second most common in 2009, falling behind only complaints about identity theft.
Resolving the Complaints
To resolve these complaints, the FTC in mid-July recommended that states pass laws that encourage consumers to fight against debt-collection lawsuits. Currently, the laws are stacked so that it’s usually easier for consumers to simply accept default judgments, which often don’t go in their favor. The FTC, according to the Journal story, also recommended that states enact laws that prevent freezing of consumer dollars in their bank accounts and require collection agencies to include more information in their complaints about the debt that consumers owe. The FTC also recommends that states pass laws making it more difficult for creditors to sue consumers on debt on which the statute of limitations has run out.
Because the odds are stacked against consumers in collection disputes, it often makes financial sense for them to consolidate debt. Any good debt consolidation program, though, should include a dose of debt consolidation counseling. If consumers don’t learn why they overspend, they’ll run the risk of simply running up more debt even after working with debt consolidation programs. It’s important, though, for consumers to consolidate credit card debt. Not only will this keep the collection agencies at bay, it will protect their credit scores. In today’s world, lenders rely heavily on consumers’ three-digit credit scores to determine to whom they loan money and at what interest rates.