What you need to know about debt collectors -- even if you have no debts: Internet ScamBusters #145
Today we focus on an alarming new trend in debt collection -- one that can affect you even if you have no debts!
Just a quick reminder before we start: The auction for the iPod nano we donated to help Hurricane Katrina victims ends on Friday. You can find more about it here.
Let's get right to it...
A Scary New Breed of Debt Collectors and Debt Collection Scams
Imagine getting embarrassing calls at work, illegal withdrawals from your bank accounts -- and even threats of violence. This is what is unfortunately happening to a growing number of consumers because of a new breed of debt collectors that most people aren't aware of.
What makes this even worse is that these debt collectors are using these abusive techniques on people who don't even owe any money; they are merely victims of identity theft -- or they have a similar name to the person who owed the money.
Just to be clear: we are NOT saying all debt collection companies use the tactics we're describing in this issue -- most certainly do not. Our goal instead is to make you aware of these growing debt collection trends that you probably aren't aware of -- and to let you know your rights if you do if you fall prey to this new breed of debt collector who uses heavy-handed (and sometimes illegal) tactics.
Consumer Debt Collection
The consumer debt buying industry began in the early 1990's when the US government started selling off assets from savings and loan banks that had failed.
As consumer debt has mushroomed over the past decade, the number of debt collection firms has skyrocketed as well, growing from about a dozen firms in 1996 to over 500 today.
Creditors are not able to devote the enormous amount of time and money into pursuing the thousands of people who fall into debt each year, and debt collection companies are eagerly stepping in to buy the debt from creditors for a fraction of the total debt.
According to the Nilson Report, a newsletter that monitors the credit industry, last year debt buyers paid an average of 5.4 cents for every dollar of unpaid debt they bought. Debt collection is a very lucrative business.
The Federal Trade Commission (FTC), which monitors the complaints lodged by consumers against debt collectors, regularly receives more consumer complaints about debt collectors than any other industry. However, the number of complaints has quadrupled in the past five years.
How It Works:
The typical debt collection company will purchase your debt from the original creditor who is essentially trying to cut its losses.
The debt collector will then attempt to recoup any, if not all, of the original debt. The worst part is not that the debt collectors are trying to collect on an old debt -- most of the time it is a genuine debt -- but instead, it is the thug-like methods employed by these collectors.
Some particularly nasty debt collection companies are resorting to illegal practices -- verbal abuse, harassment, and even threats of violence and lawsuits -- in an attempt to squeeze money from consumers for the debts the company has purchased.
In fact, many times the debt collection company isn't even bothering to harass and abuse the right consumer (just someone with a similar name), or they will attempt to collect on outdated debts that are older than 7 years and no longer exist on your credit record.
For example, the Washington Post reported that a New Hampshire man was repeatedly called by a debt collector about a loan his daughter owed -- even though the daughter had moved out 15 years earlier. The debt collector reportedly called this man six times in 15 minutes!
On the last call, the debt collector told the NH man his Social Security number, his wife's name, and threatened to send thugs.
Another particularly troubling recent practice is the growing number of cases where debt collectors persuade consumers to pay just a little of the amount due -- and then they use the bank info to improperly withdraw more money from the consumer's bank account.
The FTC enforces the Fair Debt Collection Practices Act, which outlines consumer rights and prohibits debt collectors from engaging in unfair, deceptive, and abusive practices.
The key to protecting yourself -- and your sanity -- is to know your rights under the Fair Debt Collection Practices Act.
Debt collectors may not:
- Harass you, your spouse, or any other third party.
- Make threats of violence or abuse.
- Threaten legal action if it is not lawful or there is no intent to do so.
- Attempt to collect any amount greater than the actual debt.
- Contact you at inopportune times, such as before 8:00 a.m. and after 9:00 p.m.
- Continue to contact you after you have requested in writing that they stop.
If you believe that a debt collector has violated your rights and the practices contained in the Fair Debt Collection Practices Act, you can file a complaint with the Federal Trade Commission and your state Attorney General's office.
Many states also have debt collection laws that go above and beyond what is provided in the Fair Debt Collection Practices Act. Your state Attorney General's office will have knowledge of these laws.
Victims of debt collection abuse can also file a lawsuit against a debt collector in a state or federal court if they suspect their rights have been violated.
We hope you don't ever get harassed by one of this new breed of debt collectors. It's important to know that these debt collectors are out there -- and what you can do to protect yourself.
Time to close. See you next week...