Bankruptcy

The Worrisome Truth about Debt Collectors

By Chris Kramer

There?s been some clamor in the news recently about some of the abuses in the debt collection industry. A recent article from CNN Money profiles ten people who used to work as debt collectors, and some of the behavior they attribute to their coworkers and companies is appalling:

• Many former debt collectors were reportedly encouraged to belittle or demean the debtors they called, and often ended up yelling and swearing as part of their collection tactics.
• Even when no repossession action was legally allowed, some collectors reportedly threatened to repossess a debtor?s possessions in lieu of payment.
• Some collectors allegedly threatened physical violence to debtors and even contacted family members and friends about their debts.

Significantly, one woman profiled said that she believed the debt collectors got away with the above and other illegal collection techniques because many consumers simply don?t know their rights.

In fact, federal law strictly limits the methods debt collectors can use to get their job done. The following techniques are illegal (see a complete outline here):

• Phone contact outside the 8 am ? 9 pm window
• Phone calls intended to harass, annoy or abuse (including repeated phone calls)
• Threat of legal action or arrest when none is legally permissible
• Deceit or misrepresentation in order to collect a debt (e.g. a debt collector claiming to be a law enforcer or lawyer)
• Communication with third parties about a consumer?s debt
• Contact at work after being asked to avoid such contact

Debts You Don?t Even Owe

As if such blatant misbehavior on the part of creditors as that reported by CNN weren?t enough, The New York Times recently reported that some automated court systems have been allowing collectors to collect on debts that consumers do not legally owe (such as debts discharged in bankruptcy)

The problem is complex, but it largely boils down to the fact that most consumers (about 10 percent of those contacted) apparently do nothing in response to court summonses about debts owed. And, according to sources, only about one percent of consumers contact a lawyer about their lawsuits.

In other words, this system reportedly allows collectors to sue consumers for debts and go to court without input from those consumers. This is worrisome, especially considering that as many as 94 percent of cases are allegedly dropped when proof of the debt is requested.

So what can you do to protect yourself from illegal creditor contact and legal action? Consider contacting a bankruptcy lawyer in your area if you think you?ve been wronged by the collection industry. It could save you from paying money you don?t owe.

Additional Resources

Fair Debt Collection Practices Act

Full post as published by The Bankruptcy Blog on July 22, 2010 (boomark / email).