Sunday, January 29, 2012

The growth of debt collection industry has been through aggressive practices

By Robin Miller


What would you do if you wound up on the hook for a debt you didn't even owe and your wages got garnished? 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. Although technological advances and an increase in the size of debt buyer firms have created a more profitable industry, the industry also holds the record for having the highest number of complaints filed against them 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. The creditors were informed by her, that the debt did not belong to her and that another person in area shared her name. Even though the debt collection agency had been informed, the representative followed up with a garnishment order. Her employer insisted this was not the same employee and the garnishment was dropped. Yazzie had another garnishment order against her two years later when the same debt collection firm filed suit again. Until filing a lawsuit of her own for FDCPA violations, the former standing order was still considered in affect.

At the end of the day she was finally awarded $1,260,000 in a lawsuit settlement. An extremely big award for a case like this. Lucina Yazzie took action to hold collection company accountable; but many Americans won't take action against an industry that's very well funded and made up of motivated operators who are always being pushed to their max on boiler room floors.

The debt buying industry and 3rd party debt collection had its' origin during the 1980's Savings and Loan crisis. Soon after dealing with Savings and Loan assets, the debt buying and collection industry became known by insiders as the "Adjustable Receivables Management" industry. They have now 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. As anticipated by those in the know, complainants numbered around 100,000 in 2007. The number had risen to 130,000 per year by 2009. 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.

Even though creditors are required to hire collection companies with a qualified attorney in the same state as the debtor, this threat of "legal action" is a favorite among collection agencies. This is often an FDCPA violation if the collector does not have the immediate capability and intention to sue on the debt.

Research has shown that respondents who appear before the court for their creditor lawsuits are much more likely to have their cases dropped than those who did not. 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.

Creditors often use tactics that are brusque and seem threatening but are largely bluff. One only needs to research court records of how many of their suits are dismissed to realize this. But this is a business that has a 58% increase of profits in the year 2010. Sometimes it helps to not follow all the laws and be aggressive.

Due to the large number of complaints, the Federal Trade Commission (FTC) advises individuals to utilize the provisions noted in the Fair Debt Collection Practices Act that are there to assist consumers in protecting themselves against debt collectors who do not follow the guidelines set out in the law. Similar to today's partisan legislative environment, the FDCPA faced a heated debate in Congress in 1977 and barely passed the vote. 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. Today the nee still exists.

A CNN article on money the owner of a debt collection company notes that "It's harder to get rid of debt these days." Debt has become common a burden for a large portion of the American population. Fortunately there are Certified Debt Specialists who have experience talking to hundreds of bill collectors. They have all gone through extensive training in order to familiarize themselves with every possible situation. Now more than ever creditors are beginning to realize the requirement for certified specialists with advanced technology to serve as a contact and mediator with large well funded debt collection companies that are continually growing.

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