Do you have debts that you are struggling to repay? You are not alone. According to a 2014 study from the Urban Institute, 35% of the adults that have a credit file also have debt in collections, with an average amount of $5,178.
Unfortunately, the rise in consumer debt has brought out more aggressive behavior among debt collectors. Many instances of constant harassing phone calls, threats of lawsuits or jail time, and other abusive tactics have been reported to the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB).
A recent report by the Alliance for a Just Society reviewed just over two years’ worth of data from the CFPB's files on debt collection complaints and categorized the publicly available complaints to give a clearer picture of the issues with debt collection. (Privacy issues and other concerns excluded some of the data.)
A significant number of the abuses come from third-party debt collectors or debt buyers who have purchased uncollected debt for a few cents on the dollar. Each transfer of debt ownership increases the likelihood that information about the debt will be lost or incorrectly transferred — although truly abusive debt collectors probably do not care whether they are addressing the right party or not.
The most common complaint was that respondents were being asked to pay a debt that they do not think they owe. 42% of the complaints fell into this category, representing mostly debts that were already paid or did not belong to the respondent in the first place. Debts from identity theft or debts discharged in bankruptcy take up the remainder of this category.
Communication tactics used by debt collectors were cited in 19% of the total complaints. The majority of the communications complaints (62%) centered on "frequent or repeated" calls. Quotes from complainants included phrases such as "calls me repeatedly throughout the day, every day of the week, from morning until night" and "calls multiple times a day from different numbers, won't tell me what this is for." Other communication offenses include threats of legal action, ignoring written requests to stop the calls, using abusive language, and calling before 8 a.m. and after 9 p.m.
17% of the total complaints centered on verification of the debt, either through incomplete documentation to verify the debt or not receiving the required "right to dispute" notice. 8% of respondents complained about improper handling of information, and the same number complained about false statements or misrepresentation such as impersonating attorneys or law enforcement officials. Threats of illegal actions such as arrests, seizures, and improper lawsuits constituted another 7% of complaints.
Credit card debt received the most complaints, with over 15,000 complaints representing 42% of respondents. Issues with medical debts came in second with 25% of the complaints, and payday loans accounted for another 12% of complaints. The remaining major debt categories were student loans (8%), mortgages (7%), or automobile debt (5%).
How do you avoid becoming a victim of abusive debt collection practices? The first line of defense is to know your rights, and those rights come courtesy of the Fair Debt Collection Practices Act (FDCPA). Debt collectors are required to send you a written validation notice within five days of their first contact with you. The notice must include the amount of money that you owe, the name of the creditor, and your steps to proceed in order to dispute the claim (the "right to dispute" notice).
A common practice of scam artists is to threaten a lawsuit and that the validation information will only be revealed in court. Do not fall for that line of attack. Document the failure of the debt collector to supply a validation notice, and send the debt collector a letter via certified mail asking for verification of the debt. Verify the debt collector's address — if they avoid giving you an address, they are trying to avoid the verification letter. Keep a copy of all of your correspondence in case the issue does make it to court.
Don't delay, because to exercise your rights you must make the validation request within 35 days of the first contact by the collector. Keep your communications written and do not engage them on the phone. Be careful not to imply that you owe the debt until a collector provides validation that the debt is yours.
If you are issued a summons, use independent methods to find out whether the lawsuit is real. (A fake lawsuit threat will contain a fake number as well.) Find out quickly, because if the lawsuit is real, you have a limited time to respond or courts will rule against you by default.
If the collectors continue to harass you or otherwise violate the FDCPA, contact your state attorney general, the FTC, and the CFPB. Do not be bullied or intimidated into paying bills that you do not owe or put up with abusive behavior regarding the bills that you do owe.