was removed and sold. Rather than attempt to detail more of these findings, I would ask that a copy of the report be accepted into the record of this proceeding.

Mr. Chairman, I believe copies have been distributed.

Mr. ANNUNZIO. Without objection, the report will be entered into the record.

[The report referred to is attached to Mr. Weisberg's prepared statement.]

Mr. WEISBERG. Thank you, Mr. Chairman.

Last year, the Bureau of Consumer Protection had 275 complaints concerning debt collection abuses. Although certainly not a flood of complaints, it does represent the recording of better than one complaint for each working day during the year. In addition, I believe that many files reviewed for other problems contained unrecorded collection abuses. Most important, I suspect that we see only a very small percentage of consumers with collection complaints.

Even if we assume that legislation is needed, many would argue that this is a problem best dealt with by the States. As a State representative, I agree with those who call for State legislation, but I must also deal with the realities that exist in many States. Many State legislators are among those that I spoke of earlier who believe that such legislation only aids deadbeats. Pennsylvania's legislature has been unable to pass legislation, although we have tried for several years. Bills are introduced, amended, moved to the floor and amended again, but always fall short of final passage. I have little hope of a bill reaching the Governor's desk this year. Legislation is needed and someone should step in to fill this gap.

On the other hand, I do not favor Federal legislation in this area which would preempt State law. The States should be permitted, if they wish, to provide their consumers with broader and stricter protection measures. National legislation should provide a floor, the minimum level of acceptable protection. State legislators could enact a second level of additional security.

Although I generally support legislation and believe that H.R. 11969 serves the purposes which I advocate very well, I do have a few suggestions for changes. The bill by its terms applies only to debt collectors. This term is defined to include only those principally engaged in the business of debt collecting. I am extremely concerned by the total exclusion of those collecting on their own behalf. Professional bill collectors may cause many of the difficulties which we face, but they clearly are not the exclusive troublemakers. I can see no reason to exclude any group involved in debt collection. Why should restrictions be less for those collecting on their own behalf?

There also appears to be some problem with section 808, on recordkeeping. A minimum aggregate debt of $100 is required to trigger the recordkeeping requirements. This appears to be based on a desire to lighten a debt collector's burden when small accounts are involved. Unfortunately, however, a great deal of abuse occurs in the collection of small or nuisance debts. A little harassment or intimidation may achieve a great deal when a small amount is allegedly due. The consumer may pay just to get a little peace and quiet. The collector may count on this.

I believe that the recordkeeping requirements are minimal and present little more than a record which should properly be kept in the normal course of business. If the collector does very little on the case, the required records are also very minimal.

Finally, I am not sure why subsection (a) (1) of section 808 is limited to only employers and family members. Under this subsection, records are to be kept concerning attempts to locate a missing consumer. I can see no reason why all contacts are not required to be listed, instead of only two specific types. Contacts with friends and neighbors should also be logged.

In closing, I would like to reiterate my support of this legislation. It is clear that unchecked abuses do exist. The Congress of the United States is an appropriate body to provide protection against these abuses.

Thank you again for this opportunity to appear.

[The prepared statement of Mr. Weisberg with attached report entitled "Debt Collection Abuses in Pennsylvania-The Need For No Threat Legislation" along with attached exhibits follows:]

STATEMENT OF JOEL WEISBERG, DIRECTOR OF THE BUREAU OF CONSUMER PROTECTION OF THE COMMONWEALTH OF PENNSYLVANIA

Mr. Chairman and members of the Committee:

I appreciate this opportunity to appear before you today and to speak on behalf of "no-threat" debt collection legislation for American consumers.

Unfortunately, many people still regard debt collection legislation as unnecessary protection for society's "dead beats." Such legislation should never pass, they argue, because it only serves to make debt collecting more difficult and thereby helps the "dead beat" to avoid payment. If the "dead beat" doesn't pay, the rest of us have to pay more to permit the seller to recoup his losses.

This belief is totally unfounded. Those whose intention it is to ignore legitimate debts are rarely persuaded by harassment and intimidation. They expect this treatment and have adopted their lifestyles to cope with it. It is those who have valid reasons for nonpayment, but who cannot afford to litigate the issue and those who for reasons beyond their control are unable to pay that suffer from unconscionable collection practices.

Several years ago, we in the Pennsylvania Department of Justice held hearings on debt collection practices. We heard testimony from thirty-one (31) witnesses including consumers, representatives of consumer protection agencies and representatives of business. Spokesmen for this industry generally agreed with other witnesses that abuses did exist in Pennsylvania.

To recount just a very few of our horror stories: one consumer witness alleged that a creditor not only contacted her employer but actually visited her place of business and literally fought with her employer. A 76 year old woman told of how she was informed that her home would be placed at sheriff's sale the next day. One 17 year old girl was advised to "take a last look" at her furniture before it was removed and sold. Rather than attempt to detail more of our findings, I would ask that a copy of the report be accepted into the record of this proceeding.

Last year the Bureau of Consumer Protection had 275 complaints concerning debt collection abuses. Although certainly not a flood of complaints, it does represent the recording of better than one complaint for each working day during the year. In addition, I believe that many files reviewed for other problems contained unrecorded collection abuses. Most important, I suspect that we see only a very small percentage of consumers with collection complaints.

Even if we assume that legislation is needed, many would argue that this is a problem best dealt with by the states. As a state representative I agree with those who call for local legislation, but I must also deal with the realities that exist in many states. Many State Legislators are among those that I spoke of earlier who believe that such legislation only aids "dead beats." Pennsylvania's Legislature has been unable to pass legislation, although we have tried for several

years. Bills are introduced, amended, moved to the floor and amended again, but always fall short of final passage. I have little hope of a bill reaching the Governor's desk this year. Legislation is needed and someone should step in to fill this gap.

On the other hand, I do not favor federal legislation in this area which would preempt state law. The states should be permitted, if they wish, to provide their consumers with broader and stricter protection measures. National legislation should provide a floor, the minimum level of acceptable protection. State Legislators could enact a second level of additional security.

Although I generally support legislation and believe that H.R. 11969 serves the purposes which I advocate very well, I do have a few suggestions for changes. The bill by its terms applies only to "debt collectors." This term is defined to include only those principally engaged in the business of debt collecting. I am extremely concerned by the total exclusion of those collecting on their own behalf. Professional bill collectors cause many of the difficulties which we face, but they clearly are not the exclusive trouble makers. I can see no reason to exclude any group involved in debt collection. Why should restrictions be less for those collecting on their own behalf?

There also appears to be some problems with section 808 on record keeping. A minimum aggregate debt of $100 is required to trigger the record keeping requirements. This appears to be based on a desire to lighten a debt collector's burden when small accounts are involved. Unfortunately, however, a great deal of abuse occurs in the collection of small or nuisance debts. A little harassment or intimidation may achieve a great deal when a small amount is allegedly due. The consumer may pay just to get a little peace and quiet. The collector may count on this.

I believe that the record keeping requirements are minimal and present little more than a record which should properly be kept in the normal course of business. If the collector does very little on the case, the required records are also very minimal.

Finally, I am not sure why subsection (a) (1) of § 808 is limited to only employers and family members. Under this subsection, records are to be kept concerning attempts to locate a missing consumer. I can see no reason why all contacts are not required to be listed, instead of only two specific types. Contacts with friends and neighbors should also be logged.

In closing, I would like to reiterate my support of this legislation. It is clear that unchecked abuses do exist. The Congress of the United States is an appropriate body to provide protection against these abuses.

Thank you again for this opportunity to appear.

DEBT COLLECTION ABUSES IN PENNSYLVANIA-THE NEED FOR NO-THREAT

LEGISLATION

A report to the Citizens of Pennsylvania by J. Shane Creamer, Attorney General, Commonwealth of Pennsylvania and Joel G. Weisberg, Director, Bureau of Consumer Protection, Department of Justice, Commonwealth of Pennsylvania.

INTRODUCTION

Over the past several years the Bureau of Consumer Protection, Department of Justice, Commonwealth of Pennsylvania had received numerous complaints from citizens of Pennsylvania concerning widespread abuses in the collection of debts. The complaints filed with the Bureau indicated that creditors and other bill collecting agencies engaged in a number of abusive and unlawful practices ranging from frequent and harassing dunning phone calls to false and misleading threats to ruin financially the beleaguered debtor. These complaints plus the need for knowledge concerning practices of the bill collection industry prompted the Attorney General under the auspices of the Bureau of Consumer Protection to hold hearings on collection practices in Pennsylvania.

Pursuant to the authority granted the Bureau of Consumer Protection of the Department of Justice under Section 918 of the Administrative Code of Pennsylvania, a series of hearings were held throughout the Commonwealth during the months of February and March, 1972. Hearings were held in Pittsburgh on February 23, and in Philadelphia on March 8 and 9, 1972.

At these hearings a number of witnesses including consumers, representatives of consumer protection agencies and representatives of businesses engaged in debt collection testified. Thirteen (13) witnesses testified during the full day of hearings in Pittsburgh and eighteen (18) witnesses gave testimony during the two days of hearings in Philadelphia. The testimony of the consumer witnesses revealed a common theme of harassing practices to outright threats by the collection industry. To a large extent the testimony of the representatives of consumer protection agencies corroborated the fact that there are serious abuses in the collection industry in Pennsylvania. The spokesmen for the industry generally admitted abuses in the industry and, to a man, these spokesmen deplored and condemned these practices. There is no discernible consensus among these representatives as to the nature and scope of the remedies necessary to eliminate and reduce collection abuses. Unquestionably the consumer witnesses and representatives of consumer protection agencies advocated some kind of "no-threat" legislation in this area.

The following report contains a summary of the testimony of the witnesses at the hearings, as well as a discussion of this testimony in light of present Pennsylvania law dealing with debt collection practices and the laws of other jurisdictions and recommendations. The report concludes that there is a great need for "no-threat" legislation in this state. Appended therefore to this report is a draft of proposed legislation which will be submitted for enactment.

SUMMARY OF TESTIMONY

The individual consumers who testified detailed instances of flagrant abuse by creditors and collection agencies. One witness in Pittsburgh testified that she was harassed and intimidated over a bill which she did not owe, and which was, in fact, contracted for by a person whom she had never met. The witness, a woman, was continually questioned about a bill entered into by a male whose last name happened to be the same as hers. First, the representative of the agency came to her home and asked if she knew the debtor in question. She answered that she did not. About a week later she received a telephone call from an individual who asked for the debtor by his first name. She again replied that she did not know the person. Still another call took place the following week. Again in a few days she was visited at her home and this time was asked to supply a list of her "boyfriends." Neighbors were then approached and questioned about the possible association of the witness with the alleged debtor. The so-called "conspiracy" between the witness and the alleged debtor was explained to a number of her neighbors. The neighbors were given informed that the "secret service" was involved in the investigation and was searching for the alleged debtor. Calls were made to the witness' employer. The witness insists that she does not know and has never known the alleged debtor.

Another witness testified the representatives of an agency walked uninvited into her home and at another time disturbed her at her place of employment in an effort to collect a disputed debt. Neighbors were also called in an attempt to collect the debt.

Still another witness testified she was called between five and ten times a day at her place of employment, and that although she was not a minor, her father was contacted and informed that he must pay the bill. At one point representatives of the creditor tied up three telephone lines at her place of employment at the same time, while still another placed a telephone call to her mother.

There was testimony from a witness who claimed her creditor not only contacted her employer but visited her place of business and literally fought with her employer.

A 76 year old woman testified that she was informed that her house would be placed at sheriff's sale the next day.

A 17 year old girl was told to "take a last look" at her furniture before it was all removed and sold at sheriff's sale.

In one case, a letter was sent to a witness which informed her that her home had been scheduled for sheriff's sale and included the date of the sale and the dates when the sale had been advertised in a local newspaper. No judgment had been obtained against the debtor, and no sale had ever been scheduled. In addition, this witness had conclusive proof that the debt had, in fact, been paid. The testimony of representatives from public and private organizations involved in consumer protection supported the views of the individual consumer witnesses that abuses did occur and that they occurred all too frequently. A representative

of the Pittsburgh Better Business Bureau outlined the nature of complaints which had come to the attention of his office. These included debtors who received collect phone calls with the implication that it was something important for which charges should be accepted; debtors who received up to ten telephone calls a day both at work and at home; instances of friends, neighbors, and relatives who were called and in some cases asked to make payments on behalf of the debtor; of employers who were called; of threats against credit ratings; of debtors who received simulated legal process; of debtors who were threatened with legal process which could not be carried out, and a number of instances of other abuses.

Representatives of consumer protection organizations unanimously requested new and stronger legislation to police what they consider to be the presently uncontrolled activities of these organizations within the Commonwealth. It was suggested that enforcement include remedies available both to the State and private individuals. Some urged that consumers be afforded the opportunity to bring court action on their own behalf for actual and punitive damages. Representatives of the collection industry generally agreed that their practices were not free from abuse. A number of representatives supported reasonable legislation which would control improper activities without unduly restricting proper collection activities. Those who opposed further regulation apparently did so out of the belief that this might unduly hamper collection activities. They feared that many consumers would take advantage of the situation and cease payment of any bills. They voiced concern over the possibility that legitimate agencies would be forced out of business by stringent controls. These views are exemplified by the statement of one creditor who noted that he "didn't think we should change things to make it easier for them not to pay their bills, because this is becoming more and more known-how not to pay your bills-in the past years." He went on to say, however, that "as far as harassing them, getting into their personal life, I think there are changes that can be made."

One of the spokesmen for a collection agency did state, however, that he believed that the hearings were emphasizing the wrong side of the issue. It was his position that it was the debtor who was guilty of most abuse and required greater controls. He believed that fully 90% of all debtors who contract for credit knowingly misstated their financial position in applying for that credit. He detailed at some length instances of harassment by individual debtors against their creditors. This extreme was rejected by other agencies. Others agreed that consumers too often refused to adjust legitimate debts, but did not believe that the problem was of such magnitude.

DISCUSSION

A review of all of the testimony on the record leads to the inescapable conclusion that collection activities are not sufficiently regulated to control abuse. As one industry spokesman stated: "To say that there are no abuses in the collection industry is to say that there is no crime in America. . ." It must be noted that he concluded his sentence by stating "or to say that there is no consumer who seeks credit with the express purpose of defrauding the credit grantor." The fact, however, that there are those who seek to obtain credit fraudulently does not render proper the activities of those who would collect by fraudulent means. That both problems exist does not suggest that they cancel each other out and require no further attention. Nor does the fact that seeking a solution to one of these problems does not in and of itself serve to solve the other, lead to the conclusion that both problems must be solved together, or not at all.

It is clear that a great many members of the collection industry are not engaged in improper and abusive practices. There can be no doubt that many attempt to collect their own or their client's claims in a fair and equitable manner. Where abuses do exist they cannot be placed solely on the doorstep of those who engage in the occupation of collecting debts on a full-time basis. The blame must also be borne by sellers and lenders who act to collect on their own behalf. In addition, a portion of the responsibility must be shared by those consumers who seek by all available means, both proper and improper, to avoid the payment of their just debts. The position, however, that these individuals represent 90% of those who obtain goods and services on credit is generally dismissed by members of the industry as well as by consumer advocates. The actual situation appears to have been correctly stated by the representative of the Consumer Credit Counseling Service of Western Pennsylvania, Inc., who stated that: