Wisconsin’s new debt law not in line with federal recommendations


Third-party debt collection is a multi-billion dollar industry in which charged-off debts are sold for pennies on the dollar to companies commonly called debt buyers. Such companies can attempt to collect the debt, including suing for it.

In Wisconsin, thousands of people have been sued by debt buyers in the past decade. Debts can be bought and sold more than once, making it difficult to trace the chain of ownership.

In its 2010 report, the Federal Trade Commission concluded that “the system for resolving disputes about consumer debts is broken” because of a lack of adequate protection for consumers.

To make it easier for debtors to verify the accuracy of debts, the FTC has recommended that states boost requirements for what documentation is needed at the very beginning of a lawsuit, also known as the pleading stage. It recommended that all states consider requiring the following:

    • Name of original creditor
    • Last 4 digits of original account number
    • Date of the default or charge-off and the amount due at that time
    • Name of the current owner of the debt
    • Total amount currently owed on the debt
    • Total amount owed broken down by principal, interest and fees
    • Relevant terms of the underlying contract, if the contract is not attached to the complaint

Wisconsin’s new law, signed by Gov. Scott Walker on March 1, does not meet most of these recommendations.

The law, which changed parts of the Wisconsin Consumer Act, requires that a single billing statement addressed to the customer be attached to the complaint. The billing statement must show:

    • The actual or estimated amount of money alleged to be due
    • A breakdown of all charges, interest and payments after a “date certain”

However, the “date certain” can be a date chosen by the creditor — not necessarily one that is relevant to when the debt was defaulted on or incurred. The law goes on to state that “specific itemization” is not required, a provision that advocates say hurts consumers by sometimes making it difficult to know the origin and history of the debt.

Unlike the FTC recommendations, the Wisconsin law also does not require creditors to provide the original account number, the default or charge-off dates, or the terms of the original contract.

All of that, said Stoughton attorney Mary Fons, makes it hard for consumers to verify how much, if anything, they owe.