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Texas is the Wild West for debt collection

In Texas, you must undergo hundreds of hours of instruction and have a license to be a barber. A bartender must complete an accredited training course to pour drinks statewide. But to start a debt collection agency, all that is needed is cheap and easy to acquire surety bond.

            The only requirements to operate as a debt collector are obtaining a $10,000 surety bond and filing it with the Texas Secretary of State. This requirement is not for each person acting as a collector but for each company. Hundreds of people can work under just one bond.

            There is no training required to work as a Texas debt collector and no background check is required. Felons are free to work as debt collectors in Texas.

            Texas debt collectors do not have to register anywhere so it is impossible to know how many exist. However, their numbers can be estimated by the number of active bonds on file with the Texas Secretary of State. As of March 2021, there are 2300+ active debt collector bonds.

            Breaking the Texas Debt Collection Act is technically a misdemeanor criminal offense but the maximum penalty is only $500, no matter how egregious the conduct. And I am not aware of any debt collector ever being prosecuted for violating the TDCA.

            The Attorney General of Texas has a Consumer Protection division. The AG does important work but they are spread too thin to deal with even a small portion of the complaints and tips sent their way.

            The only real deterrent to unlawful behavior by debt collectors is private attorneys who file civil cases against them. Even then, many predatory debt collectors can violate the law for years between being sued. Only about 7,000 Fair Debt Collection Practices Act cases were filed in federal court in 2020, down about 18% from 2019. The numbers are down not because debt collectors are following the law better but because it is getting harder to sue them.

            With so little regulation, and so little protection for consumers, debt collectors make money by breaking the law than following it.