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When a Friend Is Really a Foe: Why U.S. Consumer Protection Bodies Should Regulate Debt Collectors’ Use of Social Media

According to recent news stories, 47-year-old Kathryn Haralson had already faced calls from debt collectors at home and work.  When she logged into her Facebook account, however, she was surprised by an intrusive message requesting that she contact a “Mr. Rice” about her debt. And Haralson is not alone. Over the past several years, as more Americans have fallen behind on their bills, debt collectors are finding new ways to track them down—including sending Friend requests to Facebook users.

Federal regulators are looking at this practice and may end up putting restrictions on the ways in which debt collectors use social media like Twitter or Facebook to contact debtors.  The U.S. Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) are currently evaluating potential new regulations. In this column, I will discuss this growing trend, and explain why regulators should step in to provide greater clarity.

How Debt Collectors Pose as Stealth “Friends” on Social Media

In Haralson’s case, the debt collector simply sent a Facebook message identifying himself as such.  But in other cases, debt collectors may ask to become a friend, and be approved as one, before letting the user know that he or she is a debt collector.

Melanie Beacham, who was behind on her car payments, alleged that such messages constituted harassment and took debt collector Mark-One Financial to court to get the company to stop sending her Facebook messages about the debt she owed—messsages that she alleged were also sent to all of her Facebook Friends. Before the Facebook messages, Beacham claims she had received up to  23 calls per day from  Mark-One, according to news reports.  A Florida court ordered a stop to the repeated communications in a preliminary ruling barring the debt collector from calling Beacham or contacting her, her family or her Facebook friends.

And these are not the only gambits the debt collectors use. Some place rude postings on a person’s wall, (the part of a Facebook account that friends can see). Some masquerade as friendly fellow social-media users.  Some even use enticing photos to get the debtor to accept the friend request.  These gambits, though, may well be illegal. Some states have laws against online impersonation, for example.

No wonder, then, that Mark Schiffman, a spokesman for ACA International, a debt- collection trade association, said that his association has discouraged the use of social media by its members, because the law is as yet unclear as to how Facebook, Twitter, and other social-media platforms can be used legally.  While it might be clear that debt collectors should not post information about someone’s debt to a Facebook “wall,” where it will be visible by others, it is possible that Facebook Friend requests from debt collectors are okay if the debt collector makes the request in his or her own name.

But it is also clear that these requests most likely are unwanted.  If a debt collector was required by law, to disclose his or her purpose or role when making the request, then consumers could be fully informed when they decide whether or not to reply, and many would likely say “No” or simply ignore the message. Right now, though, despite the debt collector’s being able to use email to reach out to the debtor, the debtor would have to request a stop to the contact in writing—creating an asymmetry in the means of communication.

The Current Law, and What Potential Future Regulation May Look Like

David Vladeck, the former head of the Consumer Protection Division of the FTC, has stated that the CFPB should limit the ability of debt collectors to use electronic tools that are not entirely private, because the law already prohibits debt collectors from disclosing information on debts to third parties.  Because of this prohibition, debt collectors should use neither Facebook and other social media, nor work e-mail addresses, Vladeck has noted.  After all, social-media accounts may have ever-changing privacy settings, and thus may risk exposing information about a person’s credit situation to a wide range of people, which is humiliating and also against the law.

In April 2011, the FTC hosted a public workshop to examine how debt collectors are using new technologies and how this affects consumers. The workshop, titled “Debt Collection 2.0: Protecting Consumers as Technologies Change,” featured consumer advocates, industry representatives, technologists, academics, and government officials.

At present, the way in which a debt collector may collect debts is governed by the Fair Debt Collection Practices Act (FDCPA).  The FDPCA restricts how debt collectors (generally defined as third parties collecting others’ debts, and entities collecting debts on their own behalf, if they use a different name) may collect debt. Among other things, the FDCPA (1) places restrictions on a collection agency’s revealing or discussing the nature of debts with third parties (other than the consumer’s spouse or attorney); (2) prohibits agencies’ making contact with the debtor regarding a debt by using embarrassing media, such as a postcard; (3) prohibits the use of any language or symbol, other than the debt collector’s address, on a mailing envelope, except that the collector may use its business name if it does not indicate that it is in the debt-collection business; and (4) allows consumers to ask the debt collector to cease communication upon a written request.

These prohibitions were primarily aimed at ensuring adequate protection for consumers.

Since the FDCPA was enacted well before the growth of the Internet and social media platforms, it doesn’t explicitly forbid collectors from, say, posting on your Facebook wall or tweeting your relatives to ask about your whereabouts.

The FTC and the CFPB are now ready to consider what rules should govern debt collectors regarding social mediaIn the 2010 Dodd-Frank Act, the CFPB gained new powers over debt collectors that no other federal agency has ever before had. Such rules would be part of a series of regulations that would impose comprehensive federal oversight of the debt-collection industry.  In 2011, 180,000 consumer complaints were made to the FTC about the industry.

Richard Cordray, the CFPB’s director, has made debt collection a priority for the agency because about 30 million consumers—“nearly one out of every 10 Americans”—have accounts in collection, totaling $1,500 on average, he said in an October 2012 speech.

“We will be using both our supervision authority and our enforcement authority to oversee the market and go after bad actors who flout the law,” Cordray said.

On January 22, the Federal Financial Institutions Examination Council, which coordinates examination standards, asked for public comment about a proposed supervisory guidance to banks on social media. According to the guidance, debt collectors’ use of these media “may violate the restrictions on contacting consumers imposed by” current law. The draft guidance states: “The FDCPA generally prohibits debt collectors from publicly disclosing that a consumer owes a debt. Using social media to inappropriately contact consumers, or their families and friends, may violate the restrictions on contacting consumers imposed by the FDCPA. Communicating via social media in a manner that discloses the existence of a debt or to harass or embarrass consumers about their debts (e.g., a debt collector writing about a debt on a Facebook wall) or making false or misleading representations may violate the FDCPA.”

There are other ways in which the FDCPA might be amended to protect consumers. First, it is unclear at present whether a Facebook Friend request is a “communication” covered by the Act; since such a request does not itself contain information about a debt.  It could be stipulated that when a debt collector communicates via social media the collector may not remain anonymous.  If the statute was amended, or the definition of “communication” clarified, debt-collector friend requests might have to contain notice of the collector’s true intent in establishing communication.

Even if a debt collector uses his or her real name in his or her communications with a debtor, if that communication does not adequately represent the fact that the request is from a collector, the sending of that communication should also be considered a deceptive practice.

And, of course, the regulators could consider a blanket prohibition and make social media out of bounds entirely for debt collectors—since we never would have expected that these platforms would be used to chase us down.  Last fall, in the U.K., the Office of Fair Trading  made it illegal for debt collectors to contact people through Facebook or Twitter.  The interesting question is whether the U.S. will adopt a similar measure.

The CFPB, which shares jurisdiction over debt collection with the FTC, will begin taking complaints about the debt-collection industry in the second quarter of 2013, and will allow the CPFB to compile data on industry practices, as a prelude to issuing proposals for regulation later in the year.

In the meantime, social-media users who fear being embarrassed by debt collectors’ posts can protect themselves as follows: (1) use your privacy settings, (2) don’t accept unknown friend requests, and  (3) be selective about what you post.  Social networks like Facebook can create a false sense of intimacy because you assume that you are communicating with friends.  But debt collectors use social-media profiles to hunt you down and search for your current address, employer and phone numbers, among other things.

Anita RamasastryAnita Ramasastry is the UW Law Foundation Professor of Law at the University of Washington School of Law in Seattle, where she also directs the graduate program on Sustainable International Development. She is also a member of the Law, Technology and Arts Group at at the Law School. Ramasastry writes on law and technology, consumer and commercial law, and international law and globalization.
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