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When Paula Newland fell behind on her payments in early January on her 2005 Chevy Impala, the last thing she wanted to do is share that information on her Myspace profile.

But that's exactly what her debt collectors did, the Edwardsburg, Michigan resident charges in a civil lawsuit accusing Assets Recovered and Advanced Equity of violating collections law by harassing her online, on the phone and in person. And she wants a minimum of $25,000 for the alleged violations of Michigan law.

Thanks in part to the post on her Myspace page, Newland suffered "damage to her business and community reputation, extreme mental distress, aggravation, humiliation and embarrassment," according to her complaint filed in Michigan state court on March 23.

Under most state laws, debt collectors may not publicize a debt or even tell a debtor's friends, family members or work associates about a debt in order to shame a person into paying. They also must refrain from using abusive or oppressing methods, and generally have to stop calling one's home or work after being asked to communicate in writing.

Harassing calls from debt collectors have become a way of life for many as the U.S. economy has faltered and unemployment soared. Debt collection is big business:  About $40 billion each year is recovered from consumers by collectors, according to the International Association of Credit and Collection Professionals. With so much money at stake, aggressive tactics – and outright harassment - are common. Last year, the Federal Trade Commission received 78,000 complaints about debt collectors.

In one FTC complaint I’ve read, a consumer describes this harrowing episode. He was threatened by a collector over a $600 medical bill that he couldn’t pay. Out of spite, the collector managed to break the debt up into nine $70 unpaid bills, just so the consumer would get nine separate dings on his credit report.

But you don’t have to put up with dirty tricks. Put one phrase in one letter, and you can stop the harassing calls and interruptions.  The beginning of the end of a debt nightmare is to get debt collectors off your back. Here’s how.

When collection agencies call, they can be rude, threatening, and manipulative. But you have the law on your side. The Fair Debt Collection Act has very clear rules about what debt collectors can and can’t do. Naturally, collectors often don’t follow the rules, so it’s important that you know your rights. Don’t let the collectors bully you: Even though you owe someone money, and even if you may feel inferior at the moment, you deserve to be treated with respect and integrity. And you are guaranteed protection under the law.

San Diego -- Attorney General Edmund G. Brown Jr. today forced Lobel Financial, a sub-prime auto lender, to stop its "illegal campaign of harassment and intimidation" against borrowers behind in their bills.

"This company charged its customers exorbitant interest rates for car loans and then waged an illegal campaign of harassment and intimidation when they couldn't pay up," Attorney General Brown said. "Now Lobel must stop its abusive tactics and comply with the law."

Lobel Financial is headquartered in Anaheim, Calif. but makes loans to customers in Los Angeles, San Diego, Sacramento, the Bay Area, the Central Valley, and other areas of the state.

Lobel provides financing to people with poor credit who purchase vehicles through used-car dealerships. The typical interest rate of their loans is between 21-23 percent. Lobel performed its own debt collection efforts when consumers failed to make the required payments.

 

The FTC, adapting to new technologies, sees the opportunity for abuse.
By David Migoya
The Denver Post
Posted: 03/04/2009 12:30:00 AM MST

Debt collectors should be barred from sending text messages to consumers without first obtaining their permission, the Federal Trade Commission says in a new report to Congress.

The recommendation is one of several changes the FTC is urging for the Fair Debt Collection Practices Act. The FTC also recommended increases in the amount consumers can collect from rogue agencies it sues, an allotment unchanged since 1977.

"Private actions, not FTC actions, were intended to be . . . the main means of promoting industry compliance with the FDCPA," the report notes.

The advent of new technologies, such as text messaging, opens avenues for collectors to reach debtors but should be restricted if it can needlessly cost consumers additional money.

"Consumers should not have to pay to be contacted by a debt collector," the FTC says in the report issued Tuesday.

The debt-collection act established specific standards of conduct for collection agencies and prohibits abusive, deceptive and unfair practices.

The nature of consumer debt has changed drastically, with mortgage and credit-card debt increasing the most.

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One of Country's Largest Debt Collectors Agrees to Pay Record $1 Million Civil Penalty to Settle Charges of Violating Fair Debt Collection Practices Act

Nationwide Credit, Inc., of Atlanta, Georgia, has agreed to pay a $1 million civil penalty as part of a settlement with the Federal Trade Commission to resolve allegations that the company violated the Fair Debt Collection Practices Act (FDCPA). The $1 million civil penalty is the largest ever in a debt collection case. According to the FTC, Nationwide's debt collectors harassed consumers, made false and misleading representations, failed to send required validation notices, failed to verify debts when requested to do so by consumers, and made impermissible third party contacts regarding consumers' debts. Many of these allegations are the same as charges the FTC made against Nationwide in 1992. The consent filed in 1992 also prohibited violations of the FDCPA and required Nationwide to pay a $100,000 civil penalty.

The settlement includes a comprehensive consumer complaint and resolution program which was developed by Nationwide's new management and owners. "Under the new program, every consumer complaint about collection practices must be thoroughly investigated and responded to -- I expect the new program to set the standard for handling consumer complaints in the debt collection industry," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.

The FDCPA prohibits abusive, deceptive and unfair debt collection practices. For example, debt collectors cannot make false statements, threaten to take legal action they cannot or do not intend to take, use profanities or obscenities, call consumers at work if they know it is inconvenient or that such calls are not allowed by the employer, or call consumers at other times they know to be inconvenient to the consumer, such as before 8:00 a.m. or after 9:00 p.m.

According to the FTC's complaint detailing the charges, Nationwide's collectors, on numerous occasions:

•   called consumers at work when they knew the consumers' employers prohibited such calls;
•   talked with third parties, including neighbors, children, and employers, for purposes other than acquiring location information about consumers, without consumers' consent;
•    used obscene or profane language;
•    caused the telephone to ring, or engaged a person in telephone conversations, repeatedly or continuously, with the intent to annoy, abuse, or harass a consumer;
•    falsely implied that failure to pay the debt could result in arrest, imprisonment, or garnishment of wages;
•    threatened to take action -- such as filing a lawsuit -- when they did not intend to do so;
•    called consumers at times or places that they knew or should have known were inconvenient;
•    failed to notify consumers of their right to dispute and obtain verification of their debts, and to obtain the name of the original creditor; and
•    continued to try to collect debts after consumers disputed them in writing, and before Nationwide verified the debts.

After Kim Mullen filed for bankruptcy in 1993, she cut up all her credit cards. Since then, the Long Island resident has managed to obtain a good credit rating.
 
But four months ago, a debt collector contacted her, saying she had an unpaid card balance of $5,655 from 1992. With interest, the letter claimed, the debt had grown to $19,400.

As old debt seems to rise from the dead, it’s taken on a name – zombie debt. And in recent years, more such debt is coming back to haunt consumers, according to lawyers who specialize in debt.

Many credit card companies have started selling delinquent accounts to collectors to boost quarterly earnings, according to a report by Kaulkin Ginsberg, a Maryland-based adviser on debt collection. The collectors then resell some of that debt to other collection agencies.

The debt is often sold for pennies on the dollar. A $10,000 debt might cost a collector just $100. So even if the collector managed to get paid just a few hundred dollars of that debt, the profit margin would be substantial.