Wednesday 3rd of March 2021

Debt Collectors Up the Ante

As Americans acquire more and more debt, we also see a concomitant rise in complaints against third-party debt collection companies. This phenomenon of unethical collections practices has legislators and consumers very concerned. In 2006, the FTC reported receiving close to 70,000 complaints about third-party collections agencies, which is about six times the amount they received in 1999. Clearly, collectors are starting to play rough. In what follows, we’ll tell you more about the problem and what you can do about it.

Collections: The Background

Collections agencies exist because they buy consumer debts for just pennies on the dollar from major creditors. If they can get you to repay even a small part of what you owe, they make an obscene profit margin. The problem is, these agencies will go after you even if the balance has been paid or it was invalid from the beginning. If your creditor refers the debt to a collections agency, the agency assumes the debt is legitimate and will pursue repayment aggressively. Unfortunately, some consumers just pay the balance simply because they are weary of the agency’s threats and harassment and are afraid of hurting their credit score.

Government Intervention

As government officials become more aware of this problem, they are trying to take action to keep collection agencies in check. For example, New York City, which has some of the strictest consumer protection laws in the country, subpoenaed records from the eight collections companies that received the most complaints. Former governor Eliot Spitzer also sued a national collection agency because it tried to collect on thousands of debts that could not be verified.

The FTC has also taken action. The agency has strictly enforced the 1977 Fair Debt Collection Practices Act that prohibits abusive behaviors by agencies. A few years ago, the FTC won its biggest settlement ever, $10.2 million, against a debt collection agency that accused consumers of owing more than they really did and threatened them with prosecution and arrest. The FTC reports that the most commonly employed abusive tactics by agencies include overstating the size and status of a debt, calling incessantly at all hours, not investigating statements by the consumer that the balance is paid, contacting a consumer’s employer, friends, or family, and making threats to prosecute or sue. As a note, collections agencies cannot threaten legal action unless they have a legitimate legal basis to do so and intend to actually take that course of action.

What You Can Do

If you face harassing or abusive collections agencies, you can take any of the following actions:

  • File a complaint with the FTC
  • Talk with a lawyer about filing a lawsuit
  • Ask the collections agency in writing to stop contacting you. Save a copy of the letter.
  • Dispute the debt with the credit bureau if it is illegitimate.

Additional Resources