Thursday, November 8, 2007

Here's why consumer regulations are useless...

Consumer Affairs has a report on a debt collector hit with fines for, of course, abusing consumers and lying. The amount of the fine? 1.3 million.

Maybe I'm just a pessimist, but I don't see how this solves anything.

By abusing consumers, making illegal threats, etc, this company likely raked in millions in extra profits. They collect 1.25 million accounts per year. A 1.3 million fine from the FTC is probably listed on their financial report as overhead, along with electricity. Is the FTC making any difference? Of course not...we know this because they allowed this fraudulent company to stay in business.

Under the proposed settlement, LTD will pay a $1.375 million civil penalty. In addition, LTD and its owners, Timothy Feldman and Leonard Pruzansky, and its top managers, John Brewster and Derrek Davis, are permanently prohibited from misrepresenting to consumers that nonpayment of a debt will result in garnishment of wages, seizure or attachment of property, or lawsuits.

They also are permanently barred from using false, deceptive, or misleading representations in connection with the collection of any debt, communicating with a consumer at any unusual time or place, including their place of employment, or harassing, oppressing, or abusing any person.
Is anyone else laughing at this "punishment"? Aren't all of these things already illegal?

Imagine...you rob a bank for 5 million dollars, so the state sues you for 2 million and permanently prohibits you from robbing any more banks.

This is why our regulations are useless...because companies are free to abuse consumers with impunity.

1 comment:

Matt said...

It is the very nature of government consumer protection agencies to get hijacked by the industries they regulate.

As with any special interest, it's a small group of highly motivate people lobbying against the diluted and disorganized interests of everyone else.

One of the reasons that industry gets involved is the one you mentioned: to keep enforcement weak. The other common reason is to create barriers to competition.

Frankly, I think we would be better off without the false sense of security (and wasted tax dollars) of government agencies like the FTC and the CPSC.