More Americans are complaining that debt collectors are using shady and possibly illegal practices to hound them for payments, a Scripps Howard investigation has found.
Complaints this year to federal authorities about unscrupulous debt collectors are on pace to be more than 6 percent higher than two years ago. According to a Scripps Howard analysis of Federal Trade Commission (FTC) data, Americans levied nearly 228,000 objections about debt collectors from 2007 through this May, the last full month for which Scripps Howard received records.
Driving the increase are more aggressive collection tactics, a jump in the number of people falling behind on bills, lax requirements for collectors to prove that money is actually owed and booming growth in the debt-resale market, say consumer advocates, federal officials and industry experts.
"They're bullies and thugs," Jane Santoni said about the industry. Collection tactics have gotten more aggressive during the recession, said Santoni, a Towson, Md., attorney who has represented 50 people in disputes against collectors over the last seven years. "They need to be stopped."
Using records obtained under the federal Freedom of Information Act and from extensive interviews, a three-month Scripps Howard study found:
-- The volume of debt-collection complaints has risen during the recession, dominated by charges that collectors misrepresent debts, contact other people repeatedly and fail to send written notice -- practices forbidden by federal law.
-- A booming debt-collection industry that's feasting on rising consumer credit default rates and is seeking easier ways to contact people on cell phones.
-- A weak law-enforcement system, in which collection companies face scant threats if they're caught breaking the law, according to consumer advocates.
The rise in complaints comes as Americans say that they're being contacted more frequently by debt collectors, according to a poll by Scripps Howard/Ohio University. The poll found that 30 percent of respondents said they or their family had been contacted before 8 a.m. or after 9 p.m. -- times that are prohibited by law.
Many of the allegations of abusive collection tactics -- if true -- would violate the 1977 Fair Debt Collection Practices Act, which prohibits deceptive and harassing behaviors. The law allows consumers to request verification of the debt alleged, and it requires the collection company to stop making contact if asked by the consumer.
"They know what buttons to push on people to get them to pay, even when they don't think they're going to pay," said Ira Rheingold, executive director of the National Association of Consumer Advocates, a Washington-based advocacy group. "The rationale at this point is 'Do I need to comply with the law or do I need to do whatever I can to collect money?'"
Aleasha Lewis said collectors hounding her have been behaving ruthlessly -- and illegally.
Lewis, from the Baltimore suburb of Dundalk, Md., has been dealing with debt collectors since her fiance lost his job last year, causing her to fall behind on $8,000 of credit-card debt. She said the collectors are continuing to call her after she told them to stop, inappropriately contacting her friends and threatening to take her house.
"It's like a ton of bricks on your chest," said Lewis, 41. "You just stop answering your phone. Not because you're a deadbeat. It's just because you get no peace."
Jerry Shields, of the Detroit suburb of Hazel Park, Mich., wants to know why collectors have tarred his credit report, claiming he failed to pay a $85 medical bill that he's never seen.
"They have marching orders to hammer you for credit-card information until you pay it," said Shields, 66. "When they continually sandbag and won't provide you documentation, you gradually realize, 'You're not going to get anywhere with them.'"
To be sure, debt collectors play a vital role in the American economy. With 4,100 collection companies in the United States, the industry returns $40 billion annually to creditors such as credit-card companies or auto-finance houses, according to Minneapolis-based ACA International, the debt-collection trade group.
Meanwhile, the industry wants easier access to the public, and it wants Congress to legalize automated calls to cell phones. Currently, collectors must call cell phones by hand, according to an ACA official. Michael Barrist, the CEO of the world's largest debt-collection company, Horsham, Pa.-based NCO Group, told Scripps Howard that increased access to consumers' cell phones would be an "industry changer."
Scripps Howard found several companies that each generated thousands of complaints since 2007, led by NCO, which tallied 7,964 complaints. NCO has more complaints simply because it's the biggest, Barrist said.
"Our error rate -- when you add up all of the regulatory complaints we get -- is negligible," Barrist told Scripps Howard. "It's such a small number. It has no statistical value."
The FTC disciplined NCO in 2004, collecting $1.5 million for misreporting consumer information to credit-reporting agencies, according to the FTC. Barrist blamed the blunder on another collection company, now-defunct Commercial Financial Services, which had worked the debts before NCO. In 2006, Pennsylvania authorities reprimanded NCO after the company generated 800 complaints over a two-year period. NCO paid the state $300,000 and promised to follow the law.
Barrist said that when state authorities refer complaints to NCO, his firm investigates them. He added that NCO, which employs about 15,000 collectors, fires or pushes out hundreds of employees each year.
Consumer advocates argue that it's rare for government officials to take action. In the last decade, the FTC has brought 22 lawsuits claiming illegal debt-collection practices, according to J. Reilly Dolan, assistant director of the FTC's Division of Financial Services.
Dolan said his agency is constantly monitoring complaint databases, talking with state authorities and Better Business Bureaus. But he declined to specify just how many complaints a company has to generate to trigger an investigation.
Acknowledging that many Americans are scraping to get by during these lean times, debt collectors say they are increasingly allowing debtors to make installment payments rather than demanding they pay their debt back all at once.
"The industry does realize that consumers don't have enough money to pay off these debts in full," said Rozanne Andersen, executive vice president of ACA International, the industry group. "There just isn't enough money to go around."
(E-mail Isaac Wolf at wolfi(at)shns.com. Distributed by Scripps Howard News Service, http://www.scrippsnews.com)
With Debt-NCO, Debt-Yourrights, Debt-Survey
Post new comment