TransUnion in deal to improve debt collection practices

A debt-tracking registry has signed a deal with TransUnion, one of the biggest US credit bureaux, aiming to stamp out unscrupulous collection practices within the $3.3tn US consumer debt industry.

The company, Global Debt Registry, says it is shining light into a murky area. There are thousands of agencies in operation across the US, from big banks to one-man bands, all of which buy past-due debts from creditors or other businesses - often for pennies on the dollar - and try to collect.

Debts can be pursued for years after they have been charged-off or sold, including after they have been extinguished - so-called "zombie" debt. Most consumers do not know or understand their legal rights with respect to the collection of time-barred debts, meaning that some are scared into paying up, often on the basis of flimsy documentation.

In other cases, debtors may dispute legitimate claims on the grounds that they do not recognise the amount or the collector. Two of the biggest publicly listed agencies, Encore Capital and Portfolio Recovery Associates, are companies that "99 per cent of consumers have never heard of", said Mark Parsells, chief executive of GDR.

GDR has tackled these problems by assigning each debt a unique ID number, so that it and its customers can keep tabs on debts in the same way that the Department of Motor Vehicles tracks car ownership.

Over time, said Mr Parsells, broader adoption of GDR's vast database - along with supporting statements and loan applications - should improve collection rates on legitimate debt while giving peace of mind to consumers, who can check claims via Debt Lookup, a free online tool.

Regulators have struggled to keep watch over debt-collection practices as outstanding consumer credit in the US has roughly tripled over the past 20 years, to $3.3tn in February. About 77m Americans - one in three people with credit histories - are in some form of non-mortgage debt collection, according to a 2014 survey.

Debt collection accounted for 11 per cent of complaints to the Federal Trade Commission last year - the second biggest source of grievances after identity theft. A 2013 study by the FTC estimated that more than 30 per cent of debts purchased by debt buyers were at least six years old, putting them beyond or near the end of statutes of limitations in many states.

According to a January 2015 report from the National Consumer Law Center, the real percentage of zombie debt being bought by collectors is probably even higher, as the FTC's sample was limited to the biggest debt-purchasing companies.

GDR's partnership with TransUnion - one of the top three credit bureaux in the US, along with Experian and Equifax - is the most significant in the 10-year history of the Wilmington, Delaware-based group, said Mr Parsells.

Together, the pair will market its debt-registry services to buyers, collectors and other financial institutions.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation