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Monday, March 28th, 2011

The Latest on Debt Collection Laws & Rules

As you may already know, consumers in the United States are protected by a number of consumer protection laws designed to make sure merchants and service providers do not take more than a reasonable amount of consumers’ money.

One consumer protection law, the Fair Debt Collection Practices Act, outlines how debt collectors are permitted to do their job and puts certain restrictions on them. Each year, the Federal Trade Commission issues a report on the state of various consumer protection laws and its recommendations for modifications and changes in rules and enforcement.

Here’s a look at what the FTC had to say about 2010.

Debt Collection Complaints in 2010

Last year, consumer debt collection complaints topped the list, at 140,036 individual filings (an increase from 119,609 in 2009). Specifically, people identified these debt collection issues:

  • Repeated or continuous phone calls: Debt collectors are explicitly restricted from calling debtors repeatedly or with the intent to harass or annoy. Further, the FDCPA mandates that debt collectors can call only between the hours of 8 am and 9 pm local time.
  • Misrepresentation of a debt: Consumer complaints cited debt collectors who misrepresented the character, amount or status of debts owed, and in some cases demanded payments in amounts greater than those permitted by law. All such actions are prohibited by the FDCPA: debt collectors cannot lie about any aspect of a debt or about their legal authority to collect it.
  • Failure to provide adequate written documentation: The FDCPA requires that debt collectors send debtors written documents outlining the specifics of a debt and detailing the consumer’s rights regarding the debt and its collection. According to consumer complaints, though, many debt collectors are not adhering to these requirements.

Changes to Enforcement and Consumer Protection

Thanks to the implementation of the Consumer Protection Act in 2010, a new consumer rights bureau (the Consumer Financial Protection Bureau) will have authority to create and enforce (with help from the FTC) rules governing how debt collectors must operate. In future years, reports about the status of the FDCPA will be developed and issued by the new consumer protection bureau.

How to Take Action against Dishonest Debt Collectors

So what can you do if you’re plagued by debt collectors who don’t play by the rules? Take the following steps.

  • Learn your rights: Check out a summary of the rules debt collectors must follow so you know when your rights have been violated.
  • File a complaint: Visit the FTC’s complaint page to file a complaint electronically.
  • Get legal help: If a debt collector is harassing you during or after a bankruptcy filing (especially for a debt that was discharged in bankruptcy), you may want to enlist a lawyer to help.

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Posted in Predatory Lending, The Law and Your Money | 2 Comments »

Monday, November 1st, 2010

What New Debt Settlement Rules Mean for You

The Federal Trade Commission issued new rules governing how debt settlement firms can charge consumers for their services. The new rules prohibit debt settlement firms from charging upfront fees for their services, which in theory will prevent some of the predatory practices that cost consumers so much money in the past.

Here’s a summary of some of the potential side effects these new rules might have on the debt settlement process.

Fewer Ads, More Honest Claims

  • A drop-off in ads claiming to settle debts for little money: A ban on hefty upfront fees will mean that simply bringing customers through the door will no longer guarantee income for debt settlement firms, which in turn will mean that dropping money on TV and radio commercials may no longer be worthwhile financially.
  • More selective consumer selection: Now that debt settlement firms cannot charge every customer large fees, they’ll have to more carefully choose which customers they agree to help. This will likely be good news, regardless of your goals. If you’re a good candidate for debt settlement, visiting a debt settlement firm may have a greater chance of helping you than in the past. And if you’re not a good candidate, the debt settlers may be less likely to waste your time and money with their services.
  • Claims made based on all customers: Before the FTC’s rules took effect, debt settlement firms commonly made claims based only on the settlement experiences of their most successful customers. Now, though, companies must advertise using figures that represent all their customers’ experiences, meaning that the figures should more honestly represent what the company may be able to do for you.
  • Some closures of debt settlement firms: Some debt settlement firms may no longer have a workable business model without upfront fees from customers, which could mean closures in debt settlement firms.
  • “Innovative” trickery: And, finally, as with any implementation of new rules, some debt settlers may try to find ways around the new requirements. As always, you are still responsible for making sure your money and financial health is in good hands.

Debt Settlement without a Firm

If you’re struggling with debt and are trying to figure out which debt-relief option might work best for you (bankruptcy, debt settlement, credit counseling, etc.), remember that you can contact your creditors without any help from a third party. By exploring all of these options, you may find the debt-relief option that works best for you.

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Posted in Finance 101: Secure Your Future, Predatory Lending | No Comments »

Wednesday, September 15th, 2010

What You Need to Know about Debt Collectors

WalletPop.com recently published an interview with a journalist who decided to spend some time working at a debt collection agency to research whether or not the company complied with federal guidelines for debt collectors (as outlined in the Fair Debt Collection Practices Act).

His findings (which are detailed in the book Fight Back against Unfair Debt Collection Practices), are summarized below.

What to Expect from Debt Collectors

While federal law specifically states that debt collectors must follow various guidelines that basically add up to treating debtors with respect, various reports have suggested that many collectors regularly break these guidelines—and most consumers don’t realize they have rights in the matter.

Here are some classic maneuvers to watch out for and speak up about if you encounter:

  • Trainees don’t count. It seems that some collection agencies excuse illegal behavior from employees by identifying them as “trainees,” meaning that they haven’t been fully instructed on how to behave according to the laws. To counteract this potential argument, make sure you document any threatening or rude calls from debt collectors: get their name, employee number, the date and the time of the call.
  • Tapes and lawyers come in handy. Apparently, debt collectors will play by the rules if you notify them that you are recording the conversation or that your lawyer is handling your debt collection calls. Be warned, though, that professional collectors have worked with a lot of debtors and you’ll actually need to have a lawyer retained if you claim you do.
  • Don’t give permission. In order to contact you outside the hours of 8:00 am and 9:00 pm, debt collectors need your express permission; however, it seems that some debt collectors will essentially lie about getting such permission by fudging their notes about a call. This reinforces the importance of taking notes about such phone calls yourself to use in cases of harassment.
  • Collectors probably know your credit history. One reportedly common tactic is for a collector to refer to other debts you may be current on when trying to collect a debt on which you’ve fallen behind. This means that you should be checking your credit report regularly to make sure you know at least as much as they do.
  • Get settlements in writing. If you and a collector agree to settle a debt for a partial, lump-sum payment, be sure to get the agreement in writing before making any payments. The agreement should have the original amount of the debt, the agreed settlement amount and the terms of the repayment. If you’re communicating with a collector over the phone, insist on an emailed PDF or a faxed copy of the agreement before making any payment.

Protect Your Rights from Debt Collectors

If you think your rights have been violated, you may want to contact a bankruptcy lawyer in your area to see what your options are for moving forward.

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Posted in Bankruptcy News and Events | No Comments »

Thursday, July 22nd, 2010

The Worrisome Truth about Debt Collectors

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.

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Posted in Finance 101: Secure Your Future | No Comments »

Friday, January 29th, 2010

FTC Hails Victory Over Abusive Debt Collection Practices

The Federal Trade Commission announced this month that it has settled charges with three debt collectors accused of various types of abusive debt collection. For those of us who are dealing with collectors and facing a bankruptcy filing, this could mean some good changes are coming around.

The settlement, which reportedly includes the largest civil penalty ever levied on a debt collection agency, comes in conjunction with future restrictions for the defendants.

Fair Debt Collection Practices Violated

According to the case, the defendants violated terms of the Fair Debt Collection Practices Act, which outlines acceptable behavior for agencies responsible for collecting on debts. These guidelines prohibit a variety of actions, including:

  • Contacting a debtor before 8:00 am or after 9:00 pm local time
  • Contacting a debtor after receiving a written request not to do so
  • Contacting a debtor at her place of work after being told not to
  • Calling the debtor with the intent to annoy, harass or abuse
  • Contacting the debtor directly when he is known to have an attorney
  • Misrepresenting a debt or using deceit to collect money
  • Threatening arrest or legal action when neither is an option
  • Seeking more than a person legally owes
  • Publishing a person’s name on a “bad debt” list
  • Reporting information incorrectly to a credit reporting bureau
  • Contacting a third party about a consumer’s debt
  • Contacting a debtor by embarrassing media (like a post card)

In this case, the men were charged with threatening arrest and legal action when none was warranted as well as using harassment and abusive contact to collect debts. The men in question were senior managers at debt collection agencies and as such either participated in the illegal actions or were responsible for such actions among their employees.

The Settlements

One of the three defendants, Keith Dickstein, owner of Academy Collection Service, Inc., apparently paid a $2.25 million settlement in 2008. The two defendants who settled early this year, Edward S. Bastian and Edward Hurt, were saddled with fines of $375,000 and $300,000 respectively for abusive collection practices.

The fines were suspended after each man paid $7,500, based on their ability to pay; payment of the remainder will depend upon their future compliance with debt collection laws.

Your Consumer Rights

Federal law outlines many protections for consumers. Make sure you have an idea of what consumer rights you have so you can take legal action, if necessary, should they be violated. By filing bankruptcy, you can stop all form of creditor harassment, thanks to the power of the automatic stay. If creditors are harassing you over debts you can't afford to pay, you may want to explore your options with a bankruptcy lawyer.

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Posted in Finance 101: Secure Your Future | No Comments »

Wednesday, July 8th, 2009

City of Chicago to Hire Debt Collection Agencies

Well, the city of Chicago really knows how to kick somebody when they're down.

The City of Chicago is looking into hiring some debt collection agencies - some of them with checkered pasts - to collect outstanding debts owed to the city. This includes unpaid utility bills and parking tickets.

Just a few months ago, the city quadrupled parking meter rates in the middle of massive economic turmoil. Now, they'll be turning to collection agencies to ratchet up the pressure on financially strapped families.

From the Chicago Tribune's story:

"A lot of the private companies that are in line for collecting government debt have long histories of hiring people who are abusive toward debtors," said Joe Ridout, spokesman for Consumer Action in San Francisco. "They impugn the reputation of the government agencies that they are supposed to be helping out."

Ridout said some collection agencies call people at work to try to embarrass them into paying. In other cases, he alleged, bill collectors have told debtors with Hispanic surnames that they could arrange for them to be deported unless they pay up.

And who will be paying for the "work" these agencies are doing? City taxpayers. This could be a huge deal for collection agencies, who are licking their lips:

The Chicago contract could be a "giant deal," said Sean Keegan, national marketing director of United Recovery Systems in Houston. He estimated a private company would need about 200 collectors and could keep 18 percent to 30 percent of what it rakes in for the city.

If you're dealing with collection agencies, you should keep your rights in mind. Each state has their own laws regulating how collection agencies operate. Generally speaking, collection agencies:

  • Are allowed to call only between 8 a.m. - 9 p.m. If you're receiving calls late at night the collection company could be in violation of the law.
  • Cannot use profane language.
  • Cannot threaten physical harm to your or anyone else or threaten to damage your property.

If you feel your rights have been violated, speak with an attorney right away.

And if you want the harassment to stop, remember that when you file bankruptcy the Automatic Stay court order usually puts a legally-binding halt to all collection actions.

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Posted in Bankruptcy News and Events | No Comments »

Wednesday, April 8th, 2009

Assert Your Rights As a Consumer

Unfortunately, a recent report from the FBI suggests that cyber crimes increased as much as 33 percent last year.

This means that, as a consumer, you need to take steps to protect yourself and know what you can do if you’re victimized by online fraud.

Fair Credit Reporting Act

This law gives you the right to access your credit report for free and to challenge any incorrect information you see there.

Staying abreast of the information on your credit report is one of the best ways to make sure you aren’t victimized by identity theft and other cyber crimes. Just follow these steps:

  • Go to www.annualcreditreport.com and request a free credit report from Equifax, Experian and TransUnion once every year. (You may want to request one every four every four months, or all three at once.)
  • Check the information against your own records. If you notice any inaccuracies on your report, contact the agency immediately.
  • Be sure you file all complaints in writing and persist until the matter has been handled appropriately.

Incorrect information on your credit report can harm your overall credit rating – when you apply for loans or credit cards, you may be offered higher interest rates than you would have been otherwise or even be denied a loan entirely.

Truth in Lending Act

This law is designed to protect consumers in credit transactions.

Lenders are required to disclose specific information about loans (including interest rates, payment periods, late fees and more).

When lenders don’t comply with the terms of this law, your rights have been violated and you may want to take action.

Fair Debt Collection Practices Act

Creditors must adhere to strict rules when trying to collect money from you: they’re limited to calling between certain hours of the day, prohibited from certain types of contact altogether and forbidden to deceive you in order to collect money.

How to Know If You’ve Been Victimized

Besides these two acts, the government has outlined housing acts, credit reporting acts and others to make sure you get a fair shake in the world of credit. But how can you be sure you’re taking the right steps?

Consulting with a bankruptcy lawyer familiar with the laws in your state can be an effective way to make sure your rights as a consumer are recognized and, if they aren’t, to take appropriate legal action.

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Posted in Finance 101: Secure Your Future | No Comments »

Monday, February 2nd, 2009

Sick of Creditor Harassment? Tips on Dealing with Debt Collectors

The slumping economy has caused many Americans to depend on credit cards to survive. A real problem arises when the credit card bills are due and there’s no money to pay them.

Enter the debt collector.

According to the Federal Reserve, nearly one in 20 credit card accounts in the U.S. were delinquent, or more than 30 days past due, at the end of 2008. And when a credit card account becomes delinquent, debt collectors begin calling.

A recent Washington Post article provided some valuable tips consumers can use to protect their rights when debt collectors begin calling.

In Debt? You Make the First Call

Financial experts recommend calling creditors first if you’re having a problem paying bills on time.

If you call them before they call you, you may be able to negotiate a lower interest rate and/or get fees waived or reduced

Avoid Debt Collection Companies: Don’t Ignore Your Creditors

If you don’t take the opportunity to call the creditor before they start calling you, it’s not a good idea to ignore them.

If an account is more than 90 days past due, the lender may have a third-party debt collection agency step in and attempt to collect the debt.

Consumers should realize that the federal Fair Debt Collection Practices Act provides protection for consumers by restricting the actions of third-party debt collectors.

However, this law does not apply to the original creditor and if a debt is sold to another company, the law regards the new owner as an original creditor.

Credit card companies have fewer restrictions when contacting debtors, but are generally more reasonable and pleasant when dealing with consumers. These companies usually wish to keep their customers, if at all possible.

If the account is turned over to a debt collection company, it’s usually much harder for the debtor to work out a solution.

Don’t Lie About the Debt, But Don’t Acknowledge It Either

While it’s not a good idea to dodge or ignore calls from debt collectors, there are things experts say debtors shouldn’t say.

For example, some experts tell debtor to not lie, but to also not specifically acknowledge owing the debt.

Keep in mind that you’re not required to speak with debt collectors and you may terminate a phone call at any time.

Don’t Agree to Unrealistic Repayment Plans

Debtors should never agree to a payment plan that can't be managed. If you agree to a payment plan, the payments should be made according to the agreement.

Don’t Provide Personal Information

You should never provide personal financial information to a debt collector.

Some debt collectors ask for debtor's bank account numbers and routing numbers, but this information should not be provided.

Gail Cunningham of the National Foundation for Credit Counseling warns that this type of information could be used to garnish a bank account if the collector gets a judgment against you.

Know Your Debt Collector

Consumers should collect detailed information from any debt collector who calls.

Collection agencies may attempt to hide their identities, so start by trying to get the name and address of the debt collection agency from the caller.

Under the federal debt collection act, you must send a written request for the debt collector to stop calling. Verbal requests are generally ignored.

Verify the Debt

Debtors should also demand verification of the debt.

The law gives debtors the right to request and review documentation of the debt. If a debt has been resold several times, the debt collector may be unable to provide proof of the debt.

The Protection of a Bankruptcy Lawyer

If a debt collector threatens court action, it may signal that it’s a good idea for a consumer to contact a bankruptcy lawyer.

If a debtor has a lawyer, debt collectors may only attempt to contact them through their lawyer.

If a debtor winds up filing bankruptcy, an automatic stay is issued and all collection activity must stop immediately—that means no more calls, no more letters, no more contact. Period.

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Posted in Find a Bankruptcy Lawyer | 1 Comment »

Monday, April 7th, 2008

Consumer Alert on Suspicious Magazine Debt Collection Practices

The issue of "Zombie Debt" has seemingly been getting a lot of coverage in the mainstream media over the last several months.

A recent ConsumerAffairs.com story detailing how Luebke Baker has been recently attempting to collect alleged magazine subscription debts from as long as 11 years ago in some cases further depicts  the need to be aware of such deceptive debt collection practices and to protect yourself as a consumer.

Give the above ConsumerAffairs.com story a read and then be sure to check out our detailed pages on debt collection practices:

If you believe that you are the target of deceptive debt collection practices, take action and speak with a local bankruptcy lawyer about your courses of action or whether filing bankruptcy could help you.

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Posted in Economic News: How Are We Doing? | No Comments »