President Obama’s deficit reduction plan would allow debt collectors to call the cell phones of people who are late on government-backed loans. These loans include most mortgages, back taxes and federal student loans. Currently, debt collectors are only allowed to call landline home telephones.
Increased reliance on cell phones
The administration believes the move is a necessary one in light of the increasing reliance on cell phones. The provision reads:
“The Administration … proposes … facilitating contact of delinquent debtors who are most readily reached on their cell phones. This provision is expected to provide substantial increases in collections particularly as an increasing share of households no longer have landlines and rely instead on cell phones.”
Student loan defaults biggest target
Consumer law expert Margot Saunders said, “the main target will probably be student-loan debtors. Right now, the country is facing tremendous unpaid debt, not because we have a lot of deadbeats, but because a lot of people are out of work and can’t repay the debt.”
Mark Kantrowitz, of the student loan website finaid.org, says there is about $50 billion in outstanding student loans across the nation. “The fear is collection agencies will use this to harass students,” Kantrowski said. Next to identity theft, debt collection garners the largest number of consumer complaints received by the Federal Trade Commission.
Consumer advocate Tena Friery said that one of the top complaints they hear is of debt collectors calling the wrong number. “Cellphone numbers tend to change more than landline numbers, as people move from place to place or plan to plan,” she said. It can be especially annoying, and potentially costly, to receive repeated calls for a debt owed by somebody else.
Higher cell phone bills
Many are concerned that the provision will increase their cell phone bills due to repeated collection calls. Students and young unemployed people, according to CPA Howard Dvorkin, are more likely to rely completely on cell phones. Many of them use pay-as-you-go plans.
Collectors in private sector
Debt collectors in the private sector are also speaking up, saying if the administration is able to call cell phones, they should be allowed to. Cell phone restrictions, according to Mark Schiffman, director of a trade association for third-party debt collectors, make the job of collecting unpaid debts much more difficut.
May be moot
All of this speculation may be moot, however. The credit rating bureau Moody’s Investors Service says that, although the administration’s deficit reduction plan would help the nation’s credit score, its chance of getting enough support from Congressional Republicans to pass it is “extremely low.” The lack of cooperation between Republicans and Democrats in government was also one of the reasons cited by Standard & Poor’s bureau when it downgraded the nation’s credit rating in August.
Even if the plan garners enough congressional favor to pass, consumers would still have recourse to end the unwanted calls. According to the Fair Debt Collection Practices Act, debt collectors are not legally allowed to continue calling debtors if requested not to in writing.