Debt Collection Abuse - What it is and How to Fight Back
By David Carnes, staff writer
Creditor harassment is the singular most common consumer complaint in the United States. Fortunately, federal and state authorities are taking notice of the problem and are acting with increasing aggressiveness to protect consumers. In some cases, consumers win huge courtroom judgments against abusive debt collectors. How well you protect yourself depends on how well you know your rights, and how aggressively you are willing to pursue unscrupulous debt collectors.
"Debt collection companies" are sometimes mere fraudsters who may have obtained your personal information through a data breach at, for example, your bank or your credit card company. If the debt collector possesses only minimal information about you and your debt, this is very likely to be the case.
In many cases, however, the culprit is a real debt collection agency that buys debts from the original creditors and then attempts to collect them. The fact that these debt collector are real debt collection agencies doesn't make them legitimate, however, because they often use illegitimate or illegal tactics to collect debts, or attempt to collect debts that are not legally owed.
Some of the more common tactics used by illegitimate debt collectors amount to garden-variety harassment, such as calling you at odd hours and contacting you repeatedly. Threats are also common -- a debt collector may threaten to have you arrested, to ruin your credit, to file a lawsuit against you, or to get you fired from your job.
Frequently, the debts they seek to collect are invalid because they are time-barred, meaning that the creditor cannot sue you to collect the debt because the statute of limitations for filing a lawsuit has already expired. In other cases the debt is completely bogus or the amount you owe has been greatly exaggerated. Ultimately, the goal of most of these shady debt collectors is to convince you that it is easier and less expensive to simply pay the debt (or a portion of it) rather than pay to defend a lawsuit or continue to endure their harassment.
In many cases these companies will engage in "robo-signing", a process in which company executives sign hundreds of affidavits without even reading them. These affidavits allege facts that can be used as evidence in court against their targets. Some companies also engage in "robo-filing" -- filing thousands of lawsuits against their targets every year, knowing that they will win most of them on default judgments when their targets don't show up for court.
The most important precondition to fighting back against debt collection fraud is to know your rights. For example:
- You cannot be arrested for failing to pay the debt unless the creditor can prove that you did not intend to pay it at the time you signed up for it.
- In most cases, a creditor cannot harm your credit rating if more than seven years have passed since the debt became delinquent.
- The Fair Debt Collection Practices Act, valid in every state, forbids a debt collector from calling you at odd hours, calling constantly, calling you at work, or contacting your friends or employers (except to obtain contact information).
- You can unintentionally reaffirm a debt by agreeing in writing to pay it even after it becomes time-barred. Do not let a debt collector trick you into doing this.
You cannot be sued for a debt after the statute of limitations expires. The statute of limitations starts running on the date that your debt becomes delinquent, and it expires a certain number of years later -- six years in New York, for example, but only three years in Delaware. If you took out a debt in one state but a debt collection agency buys the debt and sues you in another state, the applicable statute of limitations is typically the shorter of the two.
The authorities have been cracking down on unscrupulous debt collectors in recent years. A Kansas court recently awarded a woman $83 million against debt collector Portfolio Recovery Associates, LLC for harassment over an illegitimate attempt to collect a $1,000 debt. Meanwhile, the New York Attorney General reached a settlement with Encore Capital Group, Inc. to seek to vacate over $18 million in illegitimate default judgments and pay a penalty of $675,000.
Before filing a lawsuit, consider filing a complaint with the Consumer Finance Protection Bureau (CFPB). The CFPB, created in 2011, will send your complaint to the debt collection agency, which must respond within two weeks to avoid having your complaint published by the CFPB. The CFPB also files lawsuits in court on behalf of debtors.
You can sue the debt collector yourself under the Fair Debt Collection Practices Act, and ask the court to require the defendant to pay your legal fees in addition to whatever judgment the court awards. In cases of outrageous conduct, you can also sue a debt collector for intentional infliction of emotional distress.
Don't put up with the tactics of unscrupulous creditors -- know your rights and use consumer protection law to fight back against debt collection bullies.