APNewsBreak: Obama seeks debt collector proposal

By David Espo

Associated Press

Published: Tuesday, Oct. 4 2011 12:00 a.m. MDT

WASHINGTON — To the dismay of consumer groups and the discomfort of Democrats, President Barack Obama wants Congress to make it easier for private debt collectors to call the cellphones of consumers delinquent on student loans and other billions owed the federal government.

The change "is expected to provide substantial increases in collections, particularly as an increasing share of households no longer have landlines and rely instead on cellphones," the administration wrote recently. The little-noticed recommendation would apply only to cases in which money is owed the government, and is tucked into the mammoth $3 trillion deficit-reduction plan the president submitted to Congress.

Despite the claim, the administration has not yet developed an estimate of how much the government would collect, and critics reject the logic behind the recommendation.

"Enabling robo-calls (to cellphones) is just going to lead to more harassment and abuse, and it's not going to help the government collect more money," said Lauren Saunders of the Boston-based National Consumer Law Center. "People aren't paying their student loans because they can't find a job."

Whatever the impact on the budget deficit, the proposal has aligned the White House with the private debt collection industry — frequently the subject of consumer complaints — at a time when the economy is weak, unemployment is high and Obama is embarking on his campaign for re-election.

White House press secretary Jay Carney told reporters the proposal is "just an acknowledgement of the fact that a lot of people have abandoned landlines and only have cell phones. As a matter of practicality, if they need to be contacted with regard to their debt, there has to be a way to contact them."

While Carney didn't say so, debt collection agencies are already permitted to call cell phones. The administration wants the law changed so the firms can use robo-calling.

Democrats in Congress who frequently support the president, including Senate Majority Leader Harry Reid of Nevada and House Democratic leader Nancy Pelosi of California, declined through aides to say whether they favor or oppose the plan.

Nor was there any reaction from two other members of the party's leadership in the Senate, Sens. Dick Durbin of Illinois and Chuck Schumer of New York. Both men frequently take the side of consumers in legislative struggles.

Several aides, speaking on condition of anonymity so they could talk freely, said Democrats do not want to oppose the president but are unable to support the request.

Mark Schiffman, a spokesman for ACA International, an industry trade association, said the administration "basically has come to the same solution we have" at a time when an increasing number of Americans have no landline phone to receive calls.

The change "is something we have been advocating for," he said, although he added his organization did not have direct discussions with administration officials in advance.

Schiffman noted that debt collectors have long been allowed to make robo-calls to landline phones. He said automatic dialing is a more efficient way to contact consumers who are overdue in their payments, and the industry wants it allowed in all cases, not solely those involving debts owed to the government, as Obama has proposed. Legislation along those lines was introduced in the House last week.

Federal law currently permits private debt collectors to use automatic dialing in trying to contact consumers on their landline phones. They also are permitted to make individually dialed calls to some cellphones.

The request comes at a time when the government is looking for ways to collect tens of billions of dollars.

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