Andrew Weber, C.D.S.
What would it feel like to have your wages garnished for a debt that you didn’t even owe? This unfortunate scenario happened two times to a New Mexico woman who had no connection to the Target Bank account or to the collectors employed by Target. Cases like this are becoming more common as the debt buying industry has grown by leaps and bounds since the 1980′s. Now, the combination of technology and large debt buyer firms has created a profitable industry that also holds the record for highest industry complaints logged with the Federal Trade Commission. The government does not have the resources to respond to all the complaints it receives, but luckily there are consumer protection statutes in the Fair Debt Collection Practices Act that can help consumers fight back against collection bullies.
Lucinda Yazzie had the unfortunate experience of receiving some calls from bill collectors claiming she owed a late balance on a Target card. She informed the collectors that she did not owe the debt and that there was another person in the area with the same name as her. Despite repeatedly informing the debt collection agency, the collectors pursued her and managed to get a garnishment order. Her employer insisted this was not the same employee, and the garnishment was dropped. Two years later however, the same debt collection firm filed suit again and got another garnishment order against Yazzie. This order stayed until she filed a lawsuit of her own for FDCPA violations.
At the end of the day, she was finally awarded $1.26 million dollars in a lawsuit settlement, a very large award for this type of case. Lucina Yazzie took action to hold collectors accountable; but many Americans do not defend themselves adequately against an industry that is well funded and made up of competitive employees who are pushed to the max on noisy collection floors.
The debt buying industry and 3rd party debt collection had its’ origin during the 1980′s Savings and Loan crisis. After dealing with Savings and Loan assets, the debt buying and collection industry, known by insiders as the “Adjustable Receivables Management” industry, branched out into credit card and other consumer debts.
Debt buyers and collectors grew at a slow but steady pace until the Recession hit strongly in 2008; at which time analysts predicted an increase in business as well as complaints for the debt collection industry. These predictions turned out to be true, as there were roughly 100,000 complaints in 2007; by 2009, the number had increased to 130,000 per year. Several factors influencing the rise in complaints include aggressive tactics that ignore legal boundaries, technology to increase calls to consumers, and the increasing use of local courts to sue for delinquent credit card debts.
Although a creditor must hire a collection agency with a qualified attorney in the same state as the person who owes the debt; the vague threat of “legal action” is a favorite among bill collectors. This is often an FDCPA violation if the collector does not have the immediate capability and intention to sue on the debt.
Despite the fact that most people do not show up to defend against a creditor lawsuit when summoned to court; a recent study shows that many of the respondents who did show up ended up having the cases dismissed. The study also states that the most important thing a consumer can do if sued by a creditor is to respond through the court system within the time allowed, even if the debt is not theirs.
The fact that many creditor suits are thrown out illustrates that the heavy handed tactics the collectors take can often be a bluff, as are many of their threats. However, in an industry that has seen an increase in yearly profits of 58% in 2010, being aggressive can pay off, even if the laws aren’t always followed.
Because of the high volume of complaints, the Federal Trade Commission urges consumers to use the protection provisions in the Fair Debt Collection Practices Act to defend themselves against non-compliant debt collectors. The FDCPA was enacted after an intense partisan debate in Congress in 1977 and barely passed, similar to the legislative environment of today. However, Congress ultimately realized that there was a need to protect people from all parts of society against abusive debt collection practices that were also rampant in the Seventies. That need still exists today
In a CNN Money article, the owner of a debt collection agency notes that, “Debt doesn’t go away as fast as it used to”. Debt is now a fact of life and a burden to manage for many Americans. Fortunately, there are Certified Debt Specialists who have experience talking to hundreds of bill collectors. They are professionals who know how the system works. Now more than ever, consumers are realizing the need for certified specialists with advanced technology to serve as a contact and mediator with large, well funded debt collection operations that continue to grow.
Sources -
“As Debt Grows, Collections Boom” CNN 12/8/2008
http://money.cnn.com/2008/11/25/pf/debt_collections/index.htm
“BBB Study: Debt Collection Industry Thrives, Complaints Soar” St. Louis Today 12/29/2011
http://interact.stltoday.com/pr/business/PR12291110057833
“Jury Awards Plaintiff $1.26 Million in FDCPA Violation Lawsuit” InsideArm.com 7/31/2011
http://www.insidearm.com/opinion/jury-awards-plaintiff-1-26-million-in-fdcpa-violation-lawsuit/
