11/21/2013 5:00 PM ET|
4 debt collection practices that need to change
If you don't have your own debt collector horror story, you probably know someone who does. Here is a modest proposal for some improvements to the system.
Major changes may be coming to the debt collection industry. The Consumer Financial Protection Bureau (CFPB) published an announcement asking for comments on issues facing consumers and the industry, while it prepares to develop new rules around debt collection practices.
This is a big deal — perhaps the biggest news since the Fair Debt Collection Practices Act went into law in 1977.
And more importantly, it’s a chance for consumers like you who are dealing with debt collectors to weigh in.
The stories we’ve published about debt collection on the Credit.com blog have been among the most popular with our readers, generating hundreds of questions and comments ranging from readers who don’t owe a penny but can’t stop collection calls coming in for the wrong person, to those who don’t have a penny to spare but are being hauled into court for old debts.
Based on comments from our readers, I picked a few recurring complaints and created a wish list of changes I’d like to see the CFPB address. We plan to share these with regulators, so feel free to weigh in using the comments section below if you have something you’d like to add. And the CFPB also invites you to submit your comments to them as well.
Collection calls for the wrong person
The CFPB says it is concerned that debt collectors may try to collect money for debts from the wrong consumers.
We agree, and believe consumers should be given tools to prevent multiple (and often ongoing) calls for the wrong person. I previously shared how when my daughter got her first cellphone at the age of 11, it rang constantly with calls from collectors trying to reach the person who previously held that number. It’s now some four years later, and the calls persist, albeit less frequently, despite our repeated request to collectors to have them remove her number from their databases.
She’s hardly alone. Our story on the Credit.com blog about collection calls for the wrong person currently lists 124 comments with a range of complaints from consumers, including one from Kay, who says:
"I keep getting phone calls for someone looking for a man with the same name as my ex father-in-law. I have been divorced for about 25 years, and he has been dead for about 20 years. I have told them every time they call there is no one living here by that name, and that the only one I ever knew by that name I haven’t seen in over 20 years BECAUSE HE IS DEAD. They keep calling back again and again."
Robocalls are particularly frustrating, as they do not always provide adequate information for the recipient to identify who is calling, or provide an option to allow someone who does not owe the debt to “opt out” of future calls without having to talk to collectors, who are not always accommodating.
A couple of suggestions: The CFPB could consider requiring that all robocalls provide an option for consumers in this situation, “press 5 if you believe this call is in error,” for example, as well as a central database that could be used by collectors to scrub their phone lists before they start dialing.
Confusing collection accounts on credit reports
- What is this collection account listed on my credit reports for?
- Why didn’t I get a bill before it went to collections?
- Isn’t this too old to be on my credit reports?
- Why is the same account listed with multiple collection agencies?
These are a few of the most common complaints we hear about collection accounts on credit reports. One of our readers reports that she fell behind on three credit cards and now has 14 collection accounts on her credit reports!
In some cases, the first time consumers hear about a collection account is when checking their credit reports. This problem seems to be especially prevalent in the case of medical debt. In some cases, consumers have told us they never received a bill before the debt was turned over to collections. But this may be too late. Once a collection account is on their credit reports, consumers are usually stuck with the damage for up to seven and a half years, sometimes even when there is a legitimate underlying problem.
Neverending, growing debts
Consumers who can’t pay their debts and wind up in collection are often surprised to find they actually owe more — sometimes substantially more — to the collection agency — than when they defaulted. For example, one of our readers wrote that a collection agency had doubled their debt:
"I have an old credit card collection that started as a $4,000 charge-off and the collector is telling me that I now owe double that amount. Can collectors arbitrarily charge whatever they want and call it “interest and fees”? Is there a limit to what they can charge? I want to pay the debt, and I now have a great job with decent income to do so, but I don’t want to pay more than I actually owe."
Collectors often can charge fees and/or interest, but how much they can (or do) charge is a mystery. When pressed for explanation, many collectors can’t explain how exactly they came to the figure they say consumers owe.
Just as troubling, consumers who are making payments may not be told they will be charged interest and as a result, they think that their entire payments are going to pay off the debt, when in fact only a small portion is going to principal. Without any kind of period statement or accounting of charges, consumers may make payments for years only to discover they still owe a substantial amount even though they thought their debt was paid off.
The CFPB has discussed the possibility of requiring collectors to provide better explanations of what consumers owe, and how the collector arrived at those figures. That’s a crucial first step. In addition, for consumers who are making payments on their debt, some kind of statement showing payments, interest and the current balance should be required, even if it is provided once or twice a year upon request.
Statute of limitations
Over the years, we’ve heard numerous complaints from consumers who say a debt collector is trying to collect a very old debt from them. And even consumers with more recent debts also wonder how long a debt collector can try to collect. For example, one of our readers recently wrote:
"How long will I be harassed by collection agencies? I was sick in 2007 and ended up with a bill for nearly $4,000. I have not been able to pay said bill and it has gone from one collection agency to another."
Our advice for these consumers? Research the statute of limitations for that debt in your state or talk with a consumer law attorney. Quite honestly, though, that can be easier said than done. Researching the applicable statute of limitations for various types of debts is confusing for consumers. Whom do you ask? Your state attorney general’s office may be able to help — or may not. And most people dealing with unpaid debt hardly feel like they have funds to pay an attorney for advice.
What I’d like to see: It would be helpful for the CFPB to publish and maintain an online consumer guide to the statute of limitations in all 50 states with general information on how they work. We understand it can’t cover every situation, but it could make it easier for consumers to research their options when they receive collection calls or letters for older debts.
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As if any new consumer protection laws would ACTUALLY be ENFORCED, if they were even ACTUALLY instituted.
Collection agencies and telemarketers (both legitimate and scam marketers) don't obey the consumer protection laws in place now, because the punishments aren't severe enough and they aren't ENFORCED, so WHAT makes anyone think, and what makes the bone-headed politicians believe, that new laws will make any damn difference!!!!????
My line is "By law I must inform you this conversation is being recorded.." It can and will be used in my lawsuit against your company since I am not the person you seek as you been informed several times before."
And "According to law and my attorney this is harassment since I'm have told you repeatedly I am not the person you seek."
That usually stops the calls cold.
I had one lady to go off the deep end and started screaming and cussing.
I also start talking in Vietnamese that makes their day.
I just got this new telephone number.
Apparently, it is the old telephone number of some deadbeat who owes you money.
It is not me, so quit calling. I don't know this person, I just got their old telephone number.
Why do you keep calling me.
A debt collector called me a couple months ago about a 20 year old debt.
For those who are going to advise me to pay my bills,I do and I did.
It was a joint card with an ex who used it after we were apart and didn't tell me,hence,1 of the reasons for ex.
The debt was settled long ago with the original lendor and I can't find the paperwork for it.
I receive the trash phone calls from time to time. Must be floating around?
He said he was a lawyer and blah,blah,blah.
When I told him that happy hour at your local bar doesn't qualify for passing the BAR,he was clueless,meaning,he doesn't even know what the lawyer exam is called.
He then proceeded to call me a f-a-g,say I like little boys,a wife beater etc.,etc.
THAT'S what really needs to change.
I played along saying things like 'Wow,how did you know that about me?' And I admitted to everything 'Yip,I like little girls too" and it seemed to REALLY piss them off more.
I wouldn't hang up because if I keep them on the line,they can't bother many other people with their BS,and they're not going to say anything that bothers me. I had fun anyhow.
I also said 'if you're a lawyer,you wouldn't be saying this stuff. Grow up.'
That really set them off too. I could tell easily.
When you realize what 'consider the source' actually means,you can do that.
Don't take it personal about anything these people say.
~ Senator Barack H. Obama, March 2006
I especially love it when the Indian guy calls and says he's a lawyer representing "xyz law firm" and needs to know where he can send my court documents as he is completing a criminal case against me. When I tell him to 'pound sand,' he says he's going to have the cops sent over within 45 minutes to have me arrested.
If he knows where to send the cops, then why does he need my address?
In my state the debt collector cannot charge interest on any money until they go to court on the debt and then and only then a judge says they can after winning the case.
My biggest complaint was if these people had bought the account directly from a bank as they say they do, then where is the copy of the 1099 C that is suppose to be in that file.
If a bank charges off or writes off a debt and sales the debt, it first goes to a clearinghouse usually owed by SEC, which it will stay there for no less than 30 days. This is where the portfolios are made up at. These people go through these accounts and makes sure that they are all bad debts. Occasionally they miss some. The banks cannot sell all the personal information. Especially if you opted out of them selling or sharing personal information with a third party. Sometimes banks hire collectors to collect an account for them and usually an attorney, but they do not get to see your complete file.
Why is the 1099C important? It is important because it shows income and that money that you have not repaid becomes income. These banks are suppose to send you a 1099C for your income tax. If you cannot afford to pay, the IRS will look at it. Sometimes it will be forgiven.
If the bank never sent out a 1099C, then the collector never really owned the debt. That is the fine line here.
If a debt collector does not try to collect a debt, loses in court, or you can show the account is not yours, they have to take all mention of their name and what they say you owe off all credit reports. Only the original bank at the time of write off should be on the account. It also helps to have all three credit reports. I had a collection that was reported on a Trans Union in one year and it was already reported on a different report the year before. If you get collection letters save them. This is how I proved that these people didn't buy the account from the bank as they said they did. They also dummied when the account was charged off by the bank, which was the same day as they had reported buying it. Someone goofed.
So one of things I would like to see CFPB do is to make collection agency make sure than the debt had not already been tried to be collected on before saying they bought it. Another one is that they cannot tell people they bought the account from a bank when it did not come directly from a bank.
I would like CFPB to make sure that these banks are sending out 1099 C's at the end of the year that they wrote off the account.
I got a new phone number several years ago and started to constantly receive debt collection calls for prior users of the phone number. I attempted to tell the collectors that they were calling the wrong number, but they persisted. I bought a phone that allowed me to block the calls and gave me caller ID. Now, after using the blocking phone for years, my phone is silent except for legitimate calls. However, there is always a possibility that the calls can start up again if the collection account is sold to another company. The worse part about the story is that I easily found the exact new location of the parties that the collectors were looking for on the Internet (they now live elsewhere in the state). The collectors were just too lazy to look.
Back in the 70s I had a collection company call me repeatedly and leave treatening and harrassin messaes on my machine. They usually called while I was away but one day happened to catch me at home because I had been laid offat the time.
The guy on the phone starts out something like this, " Mr *** we have been trying to contact you for quite some time now reguarding an outstanding debt we purchased from 35th National Bank and Trust. How would you like to take care of this?'
My response was i could give a *uck about it and I had already been contacted by the bank and told them to *uck off too.
Then he say well we are not the bank, you owe the money to us and we will not go away. We will take you to court and garnish your wages...
I told him that I was not working so garnish away and he asked well then how do you pay your bills, rent, food etc?
I told him that I was none of his business how I got my money, but he kept on threatening to have me brought up on bank fraud charges and a lot of other BS.
Then finally I said fine, come to my house personally and we can work this all out no problems. Yet he still wanted to know my source of income. So I told him "i enforce contracts as an independant agent."
I never heard from this company again....
I got sent to collections one time in my life.
Most fun I could have with my clothes on.
My first response was a demand that they were licensed to operate in this state, and that the amount demanded was deemed to be owed by me.
The only paperwork they could supply me was the papers sent by the company that sent the debt to collections.
At that point, I sent THEM a demand letter. Last chance. **** or get off the pot.
Either prove that I owe the debt, or I file suit against you for violation of the Fair Credit and Reporting act.
Received a letter that they were no longer interested in pursuing the debt.
I've gotten calls for the wrong person, sometimes over and over again. Several years ago before I knew about zombie debt collection, a collection agency agreed to a settlement on a debt which I paid. A few years later they demanded more money. I made the mistake of paying it. They were stealing from me since they had already agreed to a settlement and knew it.
Collection agencies get away with lots of abuses because there are few consequences. Victims are unfairly limited To suing for $1,000 per offense. That makes collection agencies nearly immune to lawsuits, since a $1,000 is pennies to them. They can count on most victims not suing since they won't get enough to make it worthwhile. It takes nearly $4,000 to equal $1,000 in 1977 when the Fair Debt Collection law was passed.
Everyone should pay their bills, but the reality is huge medical bills, loss of employment, or disaster can make it difficult or impossible to pay. Creditors will force someone into bankruptcy rather than work out a reasonable plan to pay it.
I only recently learned that Debt itself is a also a Citizen in the USA.
It isn't just the foreclosure where they take the house, nope, it is the Foreclosure AND the Debt.
And, Debt never goes away unless one bankrupts it away.
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