Consumer Law

Bad Economy - Good News For Abusive Debt Collectors?

By M. Stan Herring

A story last month in Business Week discussed how the sub prime mess and sluggish economy in general has created a good opportunity for debt collectors and debt buyers to make more money on the rising level of defaulted debts.

In the early 1990s the consumer debt-buying industry began to gain steam, and in 2005 debt buyers purchased about $110 billion of delinquent debts, about twice the amount bought in 2000. Credit-card debt consists of about 70% of the accounts sold to debt buyers, followed by automobile loans, telecommunications debt, and retail accounts. According to Kaulkin Ginsberg, the charge-off rate and the amount of outstanding consumer credit both increased in the third quarter of 2007, indicating a favorable supply environment for debt purchasers.

However the unemployment rate and the number of bankruptcy filings also rose in that quarter, indicating a more challenging collection environment as debtors had fewer resources available to pay down debts. And in February of this year U.S. consumer bankruptcy filings increased more than 15% over the prior month and 37% from a year ago, according to the American Bankruptcy Institute, using data from the National Bankruptcy Research Center.

Debt buyers and collectors certainly have a right to collect debts that are justly owed by the consumer to them. But they don't have the right to be unfair, untruthful, disrespectful or treat consumers in an undignified manner. This includes suing consumers when the debt buyers know they have no proof that the consumer owes the debt buyer the money.

If you live in Alabama and have been contacted by a debt collector or sued by a debt buyer, please feel free to contact us for a free consultation.

Full post as published by Alabama Consumer Blog on May 12, 2008 (boomark / email).