U.S. debt collectors seek cellphone, e-mail access

By John Poirier

WASHINGTON, Oct 10 (Reuters) - The debt collection industry urged the U.S. government on Wednesday to lift a decades old ban against using e-mail accounts or cellphone numbers to contact consumers who have fallen behind in their payments.

As more Americans drop home telephone land lines and rely on cellphones, debt collectors are finding it harder to reach delinquent account holders and the industry potentially faces higher losses, industry executives said at a forum sponsored by the U.S. Federal Trade Commission.

"If we can't contact somebody, that's a big problem," said Robert DiGennaro, chief executive officer of Austin, Texas- based debt collection company Collins Financial Services Inc.

Debt collection firms are third parties that have bought a variety of unpaid debt and bills such as student loans and credit card and medical bills.

Collectors are allowed to call consumers at work and home between 8 a.m. and 9 p.m., but are prohibited by law from contacting them on their cell phones or by e-mail.

But contacts through e-mails and cellphones are not off limits if they are included in the fine print of the terms of the original contract of the debt product such as credit cards.

"Today, we find that less than half of our accounts have land lines," DiGennaro said.

The other half are using cellphones, e-mails, and instant and text messaging products.

The FTC held the forum to examine changes during the three decades since Congress passed a law to ensure that debt collectors do not harass consumers.

FTC officials at the event gave no indication of whether they support changes in the law. FTC officials did not have an immediate comment.

While technology has erected barriers in the industry's ability to contact people, experts at the forum said it has also helped the industry become more efficient in automating calls and sending paper mail notices.

There are about 4,600 active collection firms with a total of 152,000 employees, according to the Federal Reserve.

In 2005, the industry recovered about $40 billion in debt and also generated revenues of $11.4 billion, said Fed economist Robert Hunt. The recovery rate on the face value of debt amounted to about 16 percent and the median profit per account after expenses was about $2, he said.

"It's pretty clear that the way to make money in this business is to collect on lots and lots of accounts," Hunt said.

The need to collect on as many accounts as possible has contributed to an increasing number of complaints with the FTC, said Jean Ann Fox, director of consumer protection at the Consumer Federation of America.