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Monday, June 20th, 2011

Sympathy for Debt Collectors?

Anyone who’s been harassed by debt collectors during tough financial times may have a hard time swallowing the latest request from the debt collection industry: give them a break. But the collection industry’s trade association has a fair point to make about its workers – they’re not all bad.

And, as happens too often, the bad apples in the group have given the whole industry a rotten reputation. Consider this troublesome info (reported in the New York Times):

  • Many debt collectors have to use fake names when they work because clients frequently threaten them. An alias protects them from anyone who might actually take action.
  • Most debt collectors have stories of being shouted at, called names and belittled while on the job.
  • In many cases, debt collectors are, in fact, trying to get money that we consumers agreed to pay.

New Consumer Protection on the Horizon?

Right now, the Fair Debt Collection Practices Act outlines what debt collectors can and cannot do. The Federal Trade Commission (FTC) regulates the industry, but has little power to punish offenders or tighten rules.

That could change starting this July, though. The Consumer Financial Protection Bureau will start actively playing the role outlined for it in 2010’s consumer protection law. Part of that role is regulating the debt collection industry, which has some debt collection workers worried.

Activists on both sides of the issue have highlighted problems with the 1977 FDCPA:

  • Since its passage, it hasn’t changed much to acknowledge new technologies like mobile devices or email.
  • The fine for violations has stayed constant at $1,000, which today doesn’t significantly deter debt collectors.
  • Many debt collectors are two or three times removed from the original creditor, which can frustrate and confuse consumers.

What to Do When The Debt Collector Calls You

It’s important to understand your rights and responsibilities as a consumer. Certain debts (like those discharged in bankruptcy and those whose statute of limitations has expired) cannot legally be collected. Other debts are the debtor’s responsibility to pay.

One debt collector interview in the Times commented that it was much easier to work with consumers than to yell at them. In many cases, admitting you don’t have the money to pay a debt can save everyone a lot of hassle. Once you’ve determined the facts, a debt collector might be able (and willing) to work toward an alternate payment schedule or some other debt modification.

And people who are really in over their heads financially may want to start making phone calls themselves – to a bankruptcy lawyer.

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

Tuesday, April 5th, 2011

Debt Collectors & New Media: What Rules Apply?

Debt collectors using new media to contact debtors, raising an issue that Consumer Financial Protection Bureau head Elizabeth Warren has indicated should be a top priority for lawmakers and attorneys general in every state.

A recent post from WalletPop.com highlights the issue, which has become more prominent and consumers - and marketers - embrace the latest technology.

Here’s a look at why this issue needs attention and how it might affect you.

Debt Collection Rules

Thanks to the Fair Debt Collection Practices Act, originally passed in 1978, debt collectors have to follow certain rules when contacting consumers about debts they owe. Generally, these rules are designed to make sure debtors are treated respectfully.

But new communication devices and debt collection practices have raised questions about what should be legal. For example:

  • Pre-recorded messages: Many debt collectors have apparently begun leaving pre-recorded messages on voicemail accounts or home answering machines. While these messages have “disclaimers” that indicate a listener should hang up if the name in question is not their own, it’s easy to ignore that instruction and learn about another person’s debt (information that should be private, according to the FDCPA).
  • Facebook messages: Some debt collectors have reportedly contacted debtors and their friends and families over social networking sites, which is not explicitly prohibited by the FDCPA (because Facebook wasn’t around when it was made law), but which many insiders argue should be considered “embarrassing media.”
  • Text messages and cell phone calls: Other debt collectors are apparently using cell phone contact to reach debtors, a method that has raised the question of usage fees. Regulators are asking whether there should be restrictions on contact that debtors must pay for by the unit.

Proposed Regulations in Some States

As of now, a few states have begun to take action to regulate the new media debt collectors have been using. The Attorney General of New Mexico has reportedly announced that debt collectors must disclose to debtors the expiration dates for debts (that is, when collectors are legally prohibited from attempting to collect them).

In Massachusetts, Attorney General Martha Coakley has released a statement introducing proposed changes to that state’s debt collection rules, which would include:

  • Extension of collection rules to apply to new media, including online, text and recorded messages;
  • Amendment of the definition of a “household” to take into account use of cell phones and email addresses;
  • Extension of rules for primary debt collectors to apply to so-called passive debt collectors (who often buy expired debts cheaply and aggressively attempt to collect on them); and
  • Requirement for debt collectors to make a good faith attempt to determine whether a debt is too old to be legally collected.

Even if you don’t live in New Mexico or Massachusetts, you could see changes to debt collection laws and practices where you live in the near future. And, if you suspect that a debt collector has broken existing rules in attempting to contact you, don’t hesitate to contact a lawyer to learn more about your rights.

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Posted in The Law and Your Money | 1 Comment »

Saturday, August 29th, 2009

Consumer Alert: Fake Bill Collectors and Rebate Checks

As you hopefully know, a well-informed consumer is a tricky target for a scammer.

Here’s a summary of are two new scams that have been reported in various parts of the country, and what you can do to protect yourself from them.

Phony Bill Collectors

Reports suggest that scammers are posing as debt collectors and threatening consumers over the phone while demanding payment.

  • Fake agency affiliation: One con artist apparently claimed he was from the “Federal Investigation Authority,” an organization that does not exist.
  • Bogus claims about consequences: Sources indicate that consumers have also reported threats of jail time if they didn’t pay debts – often, debts they no longer owed. NOTE: You cannot be sent to jail for debts. Your home may be foreclosed on, you may have your car repossessed and your wages could be garnished, but debtor’s prison is a thing of the past.
  • Worrisome knowledge of personal information: Perhaps the most troubling characteristic of this scam is that, according to sources, scammers call with a frightening knowledge of the victim’s life: SSN, friends’ names, home address, etc.

These scams can be dangerous for a variety of reasons, the least of which is that scammers might call your work phone and force you to explain an embarrassing situation to your colleagues.

  • Protect Yourself. If you’re called by a suspicious collector:
  • Don’t give out any information. Even if he already knows your digits, refuse to verify any of it.
  • Don’t agree to anything. Demand to see written proof of your debts before proceeding with the conversation.
  • Contact the original company. If you truly still owe a debt, you can find out by calling whatever company the caller names.

Rebate Check Scam

After using a credit card to purchase a number of Snuggies, one consumer reportedly received a check for $8.25 in the mail.

It appeared to be a rebate check, and had the Snuggie logo on the envelope. It was not.

  • Read the fine print. The check in question apparently indicated that, by endorsing it, consumers agreed to a month-long trial membership to “Great Fun,” a discount travel company.
  • Proceed with caution. While that may not seem so bad, the rest might. After the trial month, consumers would be automatically enrolled for full-time membership – at a cost of $150 per year, to be charged to the credit card used for the Snuggie purchase.

If you’ve received one of these checks or been victimized by a similar scam, take action by filing a complaint with the Federal Trade Commission.

Protect Yourself: Never sign a check (especially one you weren’t expecting) without reading all fine print associated with it. If that means finding a magnifying glass, then so be it!

Have you been a victim of a scam? Consider filing bankruptcy.

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