Consumers have legal protection from collection agency harassment

man making call with vintage red rotary phone

Consumer default during the recession has led to an explosion of collection agencies that rely on harassment and computerized lawsuits. Flickr photo.

Debt collection has been a growth industry in the U.S. thanks to the Great Recession. As millions of Americans struggle to pay their bills, creditors are unloading debt to collection agencies for pennies on the dollar. The collection agencies are coming down harder than ever on hurting consumers. Consumer complaints about collection agency harassment are skyrocketing. Law firms using debt collection software are swamping courtrooms. But consumers should know that they can hire an attorney to sue debt collectors for abusive practices.

Collection agencies: abuse, violence and bogus claims

More collection agencies are trying to pry money from more people who don’t have it. CNN reports that harassing phone calls, abusive language and physical violence are becoming a bigger part of the collection agency business. The New York Times reports that a single law firm can use computer software to file thousands of debt collection cases, often based on inaccurate or incomplete information supplied by creditors who sold the debt. The Post-Bulletin in Minneapolis reports that accounts have been tapped, wages seized and people threatened with arrest for debts they don’t owe or for inflated amounts.

Collection agency harassment skyrockets

Complaints of collection agency harassment swelled by 50 percent in 2009, according to the Federal Trade Commission. The CNN article said they are on track to jump 13 percent more in 2010 based on FTC complaints filed in the first six months. The top complaint is repeated calls. It is common for debt collectors to harass consumers with calls for days, weeks, months and even years. When they get someone to answer the phone, they are more likely to be abusive. Complaints of collection agencies using obscene or abusive language spiked 35 percent last year. Complaints of debt collectors threatening or resorting to violence more than doubled last year.

Debt collection software sues indiscriminately

While harassment by collection agencies is increasing, they are also hiring lawyers to sue on a mass scale. The New York Times article said a debt buyer sends a law firm a database that contains consumer data including names, home addresses, outstanding balances and the date of default. The law firm runs the data through debt collection software that runs suits through the entire legal system automatically, including collection letters, summonses and lawsuits. Most consumers who get sued by debt collection software fail to show up in court, and those who do rarely have a lawyer. A court judgment gives debt buyers the ability to collect on the debt through actions like wage or property garnishment.

Bankruptcy laws fuel debt collection industry

The debt collection industry exploded starting in 2005 with sweeping changes to federal bankruptcy laws that made it harder for people in financial trouble to get a fresh start. Instead, many defaulted on loans, expanding the debt buyers’ market. The Post-Bulletin article said the nation’s five publicly traded debt buyers last year paid $835 million to acquire $20 billion in old debts. Credit card debt makes up most of the total. But almost every type of charged-off debt, from unpaid cell phone accounts to hospital bills is for sale. Debt buyers base their claims on data up to 15 years old that can be impossible to verify, and they are ready to hound people for years.

Consumers sue to get even with collection agencies

Aggressive tactics are becoming more common. The CNN article said collection agencies calling before 8 a.m. or after 9 p.m., demanding more money than what is owed, revealing a consumer’s debt to a third party or threatening “dire consequences” like prosecution, jail time, property seizure or job loss. These practices are illegal under the FTC’s Fair Debt Collection Practices Act. Consumers can take a collector to state or federal court for harassment. If they win, the collection agency has to pay for any damages caused by the harassment, as well as court and attorney fees.

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