“They threatened to try and take my disability
away,” one complainant said of a debt collector, and another said they
“threatened to file criminal charges of check fraud” and contacted my friends
saying “I would soon be arrested.”
These comments are typical of the thousands of complaints filed by consumers
against debt collectors. A surging increase in complaints in the past few
years about the behavior of debt collectors has caused concern on the part of
federal and state agencies and consumer advocacy groups.
The Better Business Bureau (BBB) in St. Louis, MO has released a study titled “They Deal in Billions: A BBB Study of the Debt Collection
Industry, Its Soaring Growth and Problems for Consumers.” The study
points to problems in the industry and their causes, and outlines the
weaknesses in laws and their enforcement.
“The BBB believes consumers are obligated to pay their rightful debts and that
businesses have the right to collect those debts,” said Jim Hegarty, BBB
president and CEO. “But we also feel that debt collectors must obey the
law. We hope that the State Legislatures, Congress and the courts will
take notice of this rapidly increasing problem and take action to bring it
under control.”
Among the study’s findings:
- Complaints
to the Federal Trade Commission (FTC) have increased 17% over the past
year
- Debt
buyer-collectors pay pennies on the dollar for billions of dollars in
delinquent debts that have been charged off and then try to collect the
face amount of the debts
- Income
increased an average of 58% in one year for two large debt
buyer-collectors
- After
unsuccessful oral or written attempts to collect a debt, collectors have
filed suits in courts, often obtaining default judgments, and then
garnishing the wages or attaching bank accounts of the debtor
- The suits
are often filed with scanty or false information regarding the debt, and
sometimes are backed by affidavits which are robo-signed at the rate of
hundreds daily per worker by employees who have no knowledge of the debt
- The FTC,
General Accountability Office (GAO) and consumer advocacy groups have
called for numerous reforms, including amending the 33-year-old FDCPA
- In the past
three years, three large debt buyer-collectors have filed as a creditor in
221,757 Chapter 13 bankruptcy cases nationally. They presumably seek
the face value of the debt for which they paid pennies
The study notes
that in 1995, debt buyers purchased debts with a face value of $12 billion
and by 2008, that figure vaulted to an estimated $215 billion.
The study concludes: “The meteoric growth of the debt buying and selling
industry shares a portion of the blame for the soaring increase in complaints
and the plethora of calls for reform by government agencies and consumer
advocacy groups. Other reasons for skyrocketing complaint numbers may be
the downturn in the economy, an extension of unsustainable credit and the ever
increasing indebtedness of the American public.”
The study recommends:
- That
consumers work with their creditors if facing the inability to make
payments on a debt
- That
consumers check with reputable non-profit organizations for counseling
regarding any indebtedness beyond their means
- That
consumers respond to a court summons regarding a debt, even if it’s a debt
not owed. Doing so will eliminate problems that would arise later
- That
consumers file complaints with the BBB and FTC regarding improper or
illegal activity on the part of a debt collector
- That
Congress consider the many changes urged by the FTC, GAO and consumer
advocacy groups to amend the 33-year-old FDCPA
- That
businesses closely monitor the activities of agencies they hire to collect
on delinquent accounts
- That debt
collector trade associations monitor the activities of their members more
closely, including imposing penalties for proven violations of laws