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

Are old charge-offs still giving you the blues? (Photo Credit: CC BY/Caitlin Doe/Flickr)

Maintaining good credit can be challenging, particularly after a life-altering event like job loss. Understand that if a creditor throws in the towel and charges off one of your debts, that doesn’t mean that you’re in the clear. It’s quite possible that you will still be liable for that bad debt – even after it disappears from your credit report.

Charge-offs: The light side

Imagine this scenario involving a charge-off on your credit report. While the credit item may say it’s going to drop off your credit report at a certain time, that debt may still have legs because the rules for collecting a debt and the rules for reporting a debt aren’t the same, reports Bankrate. The Fair Debt Collection Practices Act (FDCPA) provides the guidelines for debt collection, while the Fair Credit Reporting Act (FCRA) holds jurisdiction over how a charge-off is reported.

On the plus side, the FCRA mandates that a charge-off must be removed from your credit report after 7 years. That includes whatever debt collection agency owned the debt. Check your credit report about a month after the charge-off is supposed to occur. If the bad debt is still there, dispute it with the three credit reporting agencies: Equifax, Experian and TransUnion.

Student loans, tax liens and Chapter 7 bankruptcies cannot be charged off.

Charge-offs: The dark side

Thanks to the FCRA, bad debt will disappear from your credit report. Unfortunately, the FDCPA makes it possible for debt collectors to pursue your debt almost in perpetuity. As there is a lucrative secondary market that purchases bad debt, there is still cause for concern on the part of the consumer who needs debt repair. Each collection agency will likely try to collect at least once before selling your charge-off.

Can a consumer escape from that bad credit card debt amassed during a span of unemployment? Because there is typically a statute of limitations, the answer is yes. The amount of time in which a debt is subject to collection via the court system varies by state, although it is usually 4 to 6 years for credit cards and 6 to 10 years for installment loans, payday loans or auto loans. Contact your state’s attorney general for more specific information.

Know your debt collection rights

If a charged off debt is past your state’s statute of limitations for collection, it cannot be legally pursued and you can ask not to be contacted against regarding that debt. If a debt collector continues to chase, you may have the option to levy a counter-suit.

Legal action will require time, money and the advice of a lawyer, however. The best way to get out from under a debt collector that is pursuing your debt in a legal fashion is to either pay what you owe in full or come to a settlement.

Sources

Bankrate.com
Equifax dispute form
Experian dispute form
TransUnion dispute form

How to deal with collections

As the debt collection industry booms, debt collection arrest warrants are interfering with pursuit of serious crimes in some states. Image: CC David Hudson Floyd/Flickr

The use of debt collection arrest warrants has mushroomed since the financial crisis. People often assume that the debtors prison is ancient history and they can’t be arrested for not paying a debt. But more than a third of U.S. states have laws that allow the debt collection industry to obtain arrest warrants to recoup money.

Debt collectors profit from public resources

More than 5,000 debt collection arrest warrants have been signed by judges in the U.S. since January 2010, according to the Wall Street Journal. In some states, debt collection arrest warrants can be issued if a borrower ignores court order to settle a debt or fails to attend a hearing. However, buying old debt for pennies on the dollar and using illegal tactics to collect those debts has become a booming industry. The  volume of debt collection arrest warrants in some states is draining the law enforcement resources needed to pursue more serious crimes. A growing number of legislators, judges and financial regulators are looking into limiting the debt collection industry’s ability to obtain debt collection arrest warrants to pressure borrowers.

Borrowers in contempt of court

Debt collection arrest warrants were typically issued for borrowers who defy repeated summons to appear in court. In debt collection cases, the warrant and arrest are usually for contempt of court. In the aftermath of the recession, many unscrupulous debt collectors use sloppy documentation and, in some cases, mistruths that that result in an arrest of a person who had no idea they were being charged with a crime. Last summer, the Federal Trade Commission began investigating the increasing use of arrest warrants in debt collection lawsuits. Last fall, Senator Al Franken, D-Minn., introduced legislation that bans the use of arrest warrants by private debt collection firms. Franken said the collection industry is taking advantage of sheriffs’ offices and other public resources to enrich themselves at the public’s expense. Franken’s bill would also require debt collectors to provide borrowers with information that verifies exactly what they owe.

How to avoid a debt collection arrest warrant

Despite the growing number of debt collection arrest warrants, an arrest is unlikely for most borrowers who get behind on their payments. Debtors prison was abolished in the U.S. in 1833. It is also illegal under the Fair Debt Collection Practices Act for debt collectors to threaten borrowers with arrest. Borrowers who are threatened with arrest by a debt collector are advised to get help immediately from a consumer law attorney. Those who do receive a summons to appear in court over a debt must not ignore it. It is even more important to appear before a judge if they are unaware of the debt or aren’t familiar with the company suing them.

Sources

Wall Street Journal

Startribune.com

Debt Collection Answers

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.

Many people do not realize the difference between a creditor and a collection agency. Because of this, misconceptions about the rules of how each can collect on a debt exist. To gain an understanding of these differences, it is important to first identify what both are and how they collect on outstanding debts.

What is a Creditor?

A creditor is the original entity that extended credit, service or a loan. This can refer to credit card companies, department stores, banks or any number of similar companies. Creditors are not generally the same as a collection agency, although many have their own internal collection departments.

How Do Creditors Collect on Debts?

First, creditors rely on consumers to responsibly pay their debts on time according to whatever schedule was originally agreed upon. This is generally done by a statement being sent to a consumer on a regular basis, which a consumer is then expected to pay on or before a designated due date. However, when this does not happen, creditors will usually charge late fees to the account, send a series of reminders and make phone calls in an attempt to collect on debts when accounts become delinquent. As time progresses, if an account remains unpaid, creditors will generally stop the consumer from using the account any further, send the account to their collections department or even hire an outside collection agency to work on collecting the bad debt.

How long does it generally take before an account is given to a Collection Agency?

This can depend, as each company has its own methods of dealing with bad debt. Usually, the process can be anywhere from three to six months. Communicating with the creditor and making an effort to make minimum payments can delay or completely stop the account from being assigned to a third-party collection agency. Once a debt goes to a collection agency, most consumers have lost any chance of negotiating with the original creditor.

How do Collection Agencies work?

Most collection agencies buy bad debt from creditors and attempt to collect on those debts for less than their original amount. Sometimes agencies will even work on a commission basis and creditors will pay them a percentage on what they are able to collect. It is not unusual for collection agencies to assign an attorney to attempt to collect on bad debt or resell a debt to another agency if they are unable to collect on it.

How far can Collection Agencies go in collecting on a bad debt?

The Fair Debt Collection Practices Act (FDCPA) regulates what collection agencies can and cannot do. Consumers should be aware, however, that the FDCPA only applies to third-party collection agencies and not to the original creditor or to its internal collections department. The FDCPA protects consumers by not allowing collection agencies to call a person’s home after nine at night or before eight in the morning. Collection agencies are not allowed to threaten a person, they are not allowed to call a person’s job if they are told that an employer does not allow collection calls, and they are not allowed to call personal friends and family members to speak to them about a person’s private finances.

Resolving Debt

Paying debts on time is always the best way to protect one’s credit rating while avoiding negative contact with creditors and collection agencies. However, when one falls behind in repaying a loan, credit card debt or other debts, a cash advance or a loan till payday may help. If bad debt continues to be a problem and accounts are referred to a collection agency, understanding how such agencies operate can be very important in learning how to communicate with them to resolve a debt.