Stock in pawnbrokers is increasing as the recession continues. Image: Pink Moose/Flickr/CC BY

As the recession continues, stock is rising in industries that profit from hard times. Pawn brokers, payday lenders, debt collectors and discount stores are more profitable than ever. Brokers are recommending buying stock in these sorts of companies rather than traditionally higher-end investments.

Recession continues as employment falls

The unemployment rate rose to 9.2 percent in June, making many stocks plummet. The number of people living below the poverty line has risen to one in seven, the highest since 1994. Consumer spending has dropped for two months in a row. Times are hard, and nobody knows if or when they will get better.

Profiting from hard times

Some industries profit from bad times. Stocks for many pawnbrokers, payday lenders, discount stores and debt collectors are on the rise. And while that may raise ethical issues for some, stock brokers are recommending buying stocks from many of these companies.

David Rosenberg, an economist at the money management firm Gluskin Sheff, said, “People are broke. They’re all chasing value. It’s a seismic shift in mindset.”

Pawnbrokers and payday lenders on the rise

John Coffey Jr., an analyst with Sterne, issued a report in June urging stock buyers to seek out Ezcorp (EZWP), a firm that owns pawn shops and makes payday loans. The stock has gone up an average of 48 percent for the last five years. Coffey argued that the stocks were worth more than than their cost by a third and would most certainly go up. Within a few hours, the stock rose by 7 percent and is now worth double what it was a year ago.

Payday lenders are increasingly becoming a good investment. Advance America Cash Advance Centers (AEA),  has seen the price of its stock double in the last year. Cash America International Inc. (CSH) is up 64 percent from a year ago.

Debt collectors also making a profit

The same holds true for many other companies that thrive on financial hardship. The profits for San Diego based debt collector Encore Capital Group (ECPG) are up 59 percent from last year. This is despite the fact that the company has faced class action lawsuits in many states concerning its debt collection practices.

Some experts disagree

Some experts believe that investing in these kinds of companies is not as safe as it may seem. They say the stocks are as likely to fall as to rise. Should the economy recover and fewer people become financially stressed, stock for these companies will drop drastically. And if the economy should continue to slip, even those companies will find less traffic.

Sources

Huffington Post
Cox

Encore Capital Group

People should watch for payday loan collection scams, which are usually conducted over the phone. Image from Wikimedia Commons.

Though any form of credit, from mortgages to payday loans, carries some risks and responsibilities, those risks do not include putting up with illegal activity. Unscrupulous people are trying all sorts of methods, including payday loan collection scams, to try to bilk people out of money.

Arkansas Attorney General sues Kansas firm for illegal collections

A Kansas-based debt collection firm is being sued by Arkansas Attorney General Dustin McDaniel for attempting to illegally collect debts the company claims are owed to payday loan lenders by citizens in the state of Arkansas, according to ArkansasNews. McDaniel has sent National Credit Adjusters two requests for information concerning its attempts to collect payday loan debts in Arkansas, but the Hutchinson, Kan., firm has not responded to either. According to a post on the Attorney General of Arkansas website, payday loan lending is illegal in Arkansas, and the debts are therefore not collectable, according to the Attorney General’s office.

Beware collectors posing as cops

A popular trick among some unscrupulous debt collectors and scam artists is to call people and pose as either state officials or police officers. People in North Carolina, according to WFMY, a CBS affiliate in the Raleigh, N.C. area, have been receiving phone calls from telemarketers posing as agents of the Federal State Bureau of North Carolina saying that people owe a debt and have to pay up right away or be arrested. An Ohio man, according to Credit.com, was contacted by lawyers for the Brooklyn County Court and told he owed a payday loan company almost $800 for a loan and collection fees, though he had only applied for an online loan but did not take it. Similar phone calls, involving a “thick accent” and posing as an official through the non-existent Brooklyn County Court, have been observed across the country, and many people who received such calls had recently applied for a payday loan online.

Forewarned and forearmed

Debt collections fall under the Fair Debt Collection Practices Act, and people who feel a debt collector is not abiding by these laws should complain to their state attorney general’s office and the Federal Trade Commission. Ask for a statement in writing, as a debt collector is required to provide one. Do not stand for tactics of intimidation; it is illegal for debt collectors to be abusive when trying to collect a debt. Also, if a debt collector claims to be an attorney, ask for the person’s name and proof of membership in the state bar association. Impersonating an attorney is a crime, and consumers should never hesitate to ask for credentials.

Sources

Arkansas News

Arkansas Attorney General’s Office

Credit.com

WFMY

Fair Debt Collection Practices Act

Beware of payday loan collection scams. / Image: ivanpw/Flickr/CC BY

Many of us in this tight economy are living from paycheck to paycheck. Payday loans can be a resource for people living close to their means when unforeseen expenses occur. Scammers, however, are preying on these already financially stressed people with threatening phone calls, trying to bully them into paying non-existent debts.

Lenders bound by laws

Legitimate payday loan companies offer small, short-term loans for people who wish to borrow against their next paycheck. However, when collection becomes an issue, these lenders are bound by laws. They are not allowed to harass their debtors, nor can they threaten arrest or jail.

Scammers in many states

In February, Maria Brown of Houston, Texas, contacted authorities reporting scammers. “They contacted me and really had me believe I was going to jail for check fraud,” Brown said. She had taken out payday loans before the calls, and the scammers seemed to have access to those applications. They sounded legitimate because of the information they possessed about her. Brown realized she was being scammed only after checking records and verifying that she had paid off her loans.

Consumeraffairs.com warns of a North Carolina caller described as “having a thick accent” who has been harassing North Carolina consumers for “a couple of years now.” The man uses abusive language and threats to frighten consumers into paying phantom debts with their credit cards. Arizona’s Attorney General’s office reported a similar scam in May. Callers claimed to be from fictitious law firms or government agencies and threatened legal action if the victims didn’t pay money owed on payday loans.

Company names to look out for

Scammers may say they represent real companies that they are not actually affiliated with, or they may use use made up company names. Illinois Attorney General Lisa Madigan reports that consumers should beware if callers say they represent Morgan & Associates, Federal Bureau of Investigators, DNR Recovery, DNI Recovery, Legal Accounts Association, Department of Law and Enforcement, Cash or ACS.

Fair Debt Collection Practices Act

According to the Fair Debt Collection Practices Act, debt collectors are not allowed to threaten arrest if you can’t pay. There is no law in the U.S. that allows arrest for unpaid loans. Collectors are also not allowed to harass, annoy or threaten any kind of violence. It is also a crime to falsely represent themselves as lawyers.

What to do if targeted

Consumers who receive these calls should never verify personal information over the telephone. Ask for written proof of the debt, which is something legitimate collectors are required to supply. Suspicious consumers may also wish to check their credit report to be sure there have been no unauthorized credit card purchases or loans taken out in their name. Report any suspicious or threatening calls to the Federal Trade Commission, the Better Business Bureau and your state Attorney General’s office.

Sources

Credit.com
Lawyers.com
Consumeraffairs.com

Debt collectors, many of whom are perfectly normal people working hard in call centers and offices nationwide, are trying to get a fairer shake in the media. Image from Wikimedia Commons.

One group of people that are almost universally despised is debt collectors. They could easily be misunderstood, as they do provide a somewhat necessary service and the only media coverage is when people are abused by collectors, not when debts are properly and calmly collected in a reasonable fashion.

Media picking up story humanizing the face of debt collection

An article that recently appeared in the New York Times has been getting a lot of mention around the web, on sites like Time and MSNBC. The focus of the piece is an effort by debt collectors to be seen as more “human” by the general populace. One of the collectors cited in the piece, who works for a debt collection firm in Minnesota, said that some customers are every bit as awful as collectors are supposed to be, as people trying to do their jobs and collect a debt will be threatened with everything from lawsuits to death on a daily basis.

Mark Neeb, the head of the trade group for debt collectors, ACA International, insists debt collectors are hard-working folk just like everyone else, and that the rotten ones are really the exception to the rule.

An uphill battle

Rehabilitating image will be hard, since most of what the public hears is that debt collectors are unethical. Searching for “debt collection” on any search engine provides many examples. For instance, according to Reuters, Encore Capital Group LLC, the largest debt collection agency in the country, is being sued by the Minnesota Attorney General for improperly “robo-signing” collection letters just like some fairly well known banks were doing, and unjustly attempting to collect the debts. A Florida debt collector, Brooks, Newman and Stone, Inc., was recently fined $7,500 by the state of Minnesota for collecting a debt on behalf of a South St. Paul business and pocketing the money, according to the Minneapolis Star Tribune. In Eugene, Ore., an attorney named Derrick McGavic was disbarred and fined $70,000 for garnishing wages without notifying people he was trying to collect a debt, according to KCBY 11, a CBS affiliate in central Oregon.

Convenient timing

Looming over the debt industry is the Consumer Financial Protection Bureau, the agency that will police everything from credit cards to payday loans. The CFPB is soon to begin operation, and will share jurisdiction with the Federal Trade Commission over debt collectors. Debt collectors have been getting in trouble with regulators more these days, as there were 140,036 complaints filed last year against debt collection agencies, up 14 percent from 2009. Debt collection is fairly simple. A debt, held by a business, is bought by a debt collector, who tries to collect it from the customer.

While most debt collection practices are legal, there are some that are prohibited by the Fair Debt Collection Practices Act. If a person is being contacted by a collector, they should familiarize themselves with the FDCPA. Also, negotiations for paying less than the total is possible, since collectors typically buy debt for pennies on the dollar.

Sources

MSNBC

Time

Reuters

Minnesota Star Tribune

KCBY 11

Federal Trade Commission and Fair Debt Collection Practices Act

Facebook has become a vehicle for debt collectors to harass people. Image: Flickr/benstein CC-BY-SA

Most businesses these days are creating social media positions to co-opt the reach of Facebook, debt collection agencies included. A Florida woman made headlines late last year when she hired an attorney to sue a debt collection agency for harassing her via Facebook. The federal government, which received more complaints about debt collection than any other industry in 2010, is considering how to update consumer protections for the social media era.

Debt collectors and social media

It’s no secret that debt collection agencies use the Internet to find people who owe money. The Orlando Sentinel first reported about Melanie Beacham of Tampa, Fla., last November when she fell $362 behind with her car payments. Beacham’s auto loan account was promptly sent to collection. Calls, text messages and emails started rolling in. After she worked out a payment plan with her creditor, a debt collection agency called MarkOne Financial sent a message to all Beacham’s friends on Facebook asking them to urge her to call the debt collector. Beacham hired an attorney to sue MarkOne, citing violations of federal and Florida law. The lawsuit claims the debt collection agency harasses consumers, their families and their friends using Facebook. The lawsuit is pending, but in March, a judge ordered MarkOne not to contact Beacham, her friends or family via Facebook or any other social networking site.

The Fair Debt Collection Practices Act

After the court scolded MarkOne, Beacham’s attorney, Billy Howard, head of the consumer protection department at the law firm of Morgan & Morgan, said it was the first ruling in the country that specifically banned a debt collector from using social media. But that hasn’t stopped MarkOne. Three weeks ago Howard filed a suit on behalf of another woman against MarkOne for Facebook debt collection harassment. But posting messages on Facebook telling the world someone is behind on a debt could be a violation of the Fair Debt Collection Practices Act of 1978. That was enacted decades before the advent of Facebook, but the Association of Credit and Collection Professionals said the rules apply to social media the same as phone calls or letters. Debt collectors can only contact third parties if the collection agency can’t locate the debtor. Debt collectors are also barred from disclosing to a third party why the debtor needs to be contacted. In both these instances, MarkOne appears to violate the law.

Debt collection 2.0

A Federal Trade Commission’s annual report required by the Fair Debt Collection Practices Act shows that the agency received more complaints about debt collection in 2010 than any other industry. The FTC recorded 140,036 complaints about debt collectors, 27 percent of all complaints received by the agency and an 18 percent increase from 2009. The FTC will host a public workshop in Washington, D.C., April 28 called Debt Collection 2.0 that will include a discussion about social media. In July, the new Consumer Financial Protection Bureau will begin working with the FTC to create debt collection rules, field complaints and educate both consumers and debt collectors.

Sources

MSNBC

Orlando Sentinel

Money Talks News

Don't assume a debt collector is throwing you a life preserver. Demand they verify your debt first. (Photo Credit: CC BY-ND/Gibson Regester/Flickr)

If you’re drowning in debt and need major credit repair, don’t automatically assume that debt collectors have your best interests at heart. Their job is to get paid, and the truth is that sometimes, unscrupulous techniques are used that can be illegal. Before agreeing to a payment plan or even filing for bankruptcy, demand that the collector verify your debt in writing.

Debt validation: A bankruptcy scenario

Bankrate.com provides a useful example of a scenario in which someone should demand that a debt collector validate a debt. A couple has a home with a mortgage that is in both their names. One person is in collections with $30,000 in credit card debt solely in her name. She is considering filing for Chapter 13 bankruptcy, but the couple is concerned about losing the house in the deal.

While there are some potential complications that would require the consultation of a bankruptcy attorney (or two, if a second opinion is desired), Bankrate points out that filing for either Chapter 13 or Chapter 7 bankruptcy will generally not put a home at risk.

How to get aggressive with unscrupulous debt collectors

Get everything in writing when dealing with debt collectors. Don’t reveal bank account information when they push to set up automatic payments. Demand that the debt collector provide a fax number or address to which you can submit a request for debt validation. Simultaneously, dispute the debt in question.

By demanding debt verification, you’re demanding that the debt collector prove that you owe the money, that the collector has the legal right to collect and that the original company that held the account is clearly identified. By disputing the debt, you’re one step ahead in case the debt is erroneous or the collector does not have the information. Few things are as fruitless as giving money to a collection company that may not even own your account.

Know your legal rights

Under the Fair Debt Collection Practices Act, a consumer has the right to force a debt collector to validate a debt. Attorney Tom Martin of Price Law Group says that if debt collectors fail to comply, they cannot legally continue to harass a consumer for payment. If the collector continues, the consumer may even be entitled to monetary damages. But that’s not all:

“If a debt collector receives a dispute from a consumer, and the debt collector has been reporting the consumer’s account to the credit bureaus, the collector must also start reporting the account as disputed,” Martin reminds.

As a final note, the “get it in writing” directive must also apply to the consumer. If any debt payments are made, receipts and statements should be kept as proof in the event of a lawsuit.

Sources

Bankrate
Fair Debt Collection Practices Act
Lawyers.com: bankruptcy attorneys
U.S. Courts

What happens when you’re drowning in debt?

Consumers can see through the payday loan debt collection scam if they understand their rights, the law and their finances. Thinkstock photo.

A payday loan debt collection scam has been victimizing consumers in Illinois. Con artists posing as debt collectors have somehow obtained the phone numbers and personal data of current and former payday loan borrowers. Reaching their targets on the phone, the fraudulent payday loan collectors use scare tactics such as bullying and the threat of lawsuits and jail. The payday loan debt collection scam has proliferated to the point that Illinois Attorney General Lisa Madigan has issued a consumer alert.

Debt collection scammers use threats and intimidation

In recent weeks, the Illinois attorney general’s office has fielded a marked increase in consumer complaints about phone calls from bogus payday loan debt collectors. Consumer Affairs reports that people who have gotten payday loan scam calls say they’ve taken out payday loans, most often from online payday lenders, but have paid the debt on time. They say the scammers know their names, social security numbers, employer and bank account numbers. Because the con artists have such sensitive personal information, their victims often believe the debt collectors are legit. The scam artists use threats and intimidation, such as lawsuits and jail, to dupe them into authorizing a direct withdrawal from their checking account. Sometimes, consumers are tricked to sign promissory notes and fax them to the bogus collectors.

Legitimate payday lender compromised

Illinois payday loan customers aren’t the only ones getting harassed by debt collection scammers. Wallet Pop reports that the payday loan scam calls have surfaced in Ohio, Colorado, Florida, Indiana and other states around the nation. Madigan said the scammers say they are from a variety of bogus companies, such as Morgan & Associates, Federal Bureau of Investigators, DNR Recovery, DNI Recovery, Legal Accounts Association, Department of Law and Enforcement, CashNet USA, America Legal Services, Quick Cash and ACS. Most of the names are fake. However, CashNet USA is real. On its website, CashNet USA has posted a warning about the scam.

Debt collection harassment is illegal

Under the FTC’s Fair Debt Collection Practices Act, it is illegal for debt collectors to call before 8 a.m. or after 9 p.m. They also can’t demand more money than what is owed, reveal a consumer’s debt to a third party or threaten lawsuits or arrest. Even so, some victims of the Illinois payday loan scam calls told Madigan’s office that they were fooled into paying several hundred dollars. Illinois TV station WIFR reports that Madigan offered some advice for people if they are contacted by the scammers.

People don’t go to jail for failing to pay a debt in this country.

Never give out any personal information over the telephone, especially bank account numbers or credit card numbers.

When in doubt, ask the debt collector to produce documentation that qualifies the debt they seek to collect.

Contact the original creditor to confirm if the debt has been paid. If not, confirm that the debt was sold to a third party collector before making a payment.

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.

Creating a debt management plan helps consumers pay debt, reestablish credit and begin to regain control over their finances. However, many avoid doing so because of misconceptions about the way that debt management plans work. In some cases, people have been purposely misled by debt counselors to believe myths about debt consolidation. For others, insecurities about being unable to pay debt obligations have convinced them that they are precluded from creating a debt management plan that works.

Debt management plans explained

A debt management plan (DMP) is created with a trained counselor who is willing and able to help consumers pay debt and rebuild credit profiles. In order to do so, a consumer agrees to regularly deposit money into an account and allow the counselor to pay debt that it owed from that money. An added bonus of a DMP is that many debt collectors are inclined to lower or eliminate fees that have accrued on the account due to previous non-payments. When a counselor is allowed to pay debt on behalf of the consumer, most creditors realize the opportunity to collect what is owed to them and are willing to cooperate in making it affordable to do so.

Dispelling myths about debt management plans

While many creditors view a debt management plan positively, it is never guaranteed that they will do so. It should be clearly understood that the creditor is under no obligation or expectation of reducing amounts owed, but such is done as a courtesy at the creditor’s discretion. Therefore, existing fees should always be factored into the overall budget used to pay debt.

People are also sometimes reticent to participate in a DMP because they have heard rumors that doing so will hurt their credit. For the most part, this is false. In fact, more often than not, the opposite is true. Many creditors view DMPs as a person being serious about regaining control of their finances and repairing their credit. While it is up to individual creditors as to whether or not they will grant future credit, many are inclined to do so as they see a person taking serious strides to pay debt. Also, creating a debt management plan does not adversely affect one’s FICO score at all and, in fact, the Fair Isaac Company does not give reference to debt counseling on one’s credit report.

A Word to the Wise on Debt Counseling

Many have also been afraid of creating a debt management plan because they have been in contact with unscrupulous debt counselors. Unfortunately, charlatans exist in every industry and financial planning is not exempt. In some cases, people have been told that the best way to repair their credit is to pay an exorbitant fee to a counselor, while ignoring past debts. In these scenarios, people have trusted supposed experts to do the right thing and, instead, their credit has been further ruined as their hard-earned money has been pocketed, while their debts have sometimes worsened.

Rebuild credit and a new financial future with a debt management plan

Overall, a debt management plan is a great way to pay debt while reestablishing one’s credit. Often, perks such as lower fees on existing debt and new credit is extended, though not guaranteed. As people become more educated on options available to them to pay debt and rebuild credit, the allure of a debt management plan becomes a perfectly reasonable option and one that can realistically give people control over their financial futures, once again.