Sunday, October 15, 2006

Abuse by debt collectors growing

Pa. consumer protection bureau reports 3,240 complaints in '06, the most of any industry tracked
Sunday, October 15, 2006

By Patricia Sabatini, Pittsburgh Post-Gazette

Bill collectors aren't exactly known for their genteel ways.

Take the case in which a collection agency telephoned a woman's 5-year-old daughter, ordering her to tell her deadbeat mommy that she'd better pay her credit card bills.

"Another customer had 12 messages at the office in one weekend. Another had 36 calls in one week," said David Sumner, senior deputy attorney general with Pennsylvania's Bureau of Consumer Protection.

Such tactics are considered harassment and violate state and federal regulations intended to protect consumers from overzealous debt collectors, he said. Abusive practices such as repeated phone calls or the use of threatening or obscene language also continue to sully the debt collection industry, Mr. Sumner and other regulators say, even though a majority of collection agencies are reputable firms that work within the law.

"We believe the mistreatment of consumers by debt collectors is a serious problem," said Tom Kane, an attorney with the Federal Trade Commission's division of financial practices.

Complaints about debt collectors have risen in recent years at the state and national level, both in absolute terms and as a percentage of overall complaints. Still, it's hard to know if the increase is because bill collectors are getting worse, or simply because more people are complaining.

In Pennsylvania so far this year, the consumer protection bureau logged 3,240 complaints about debt collectors, the most of any industry. The tally outpaced the broader categories of telecommunications (second with 3,155 complaints) and buying services (third with 2,827), a segment that includes such things as gift certificates, coupons, rebates and contests.

While some gripes come from people searching for a loophole to skirt their debts or who simply don't like being reminded they owe money, many complaints are prompted by bill collectors stepping over the line, regulators said.

Sometimes, the problem lies with a "rogue" employee at an otherwise reputable company.

"If its an upright company, it will discipline the employee or let them go," Mr. Sumner said.

In Pennsylvania, complaints are often about bill collectors calling too often or taking aggressive actions, such as contacting a neighbor, relative or boss to pressure payment, Mr. Sumner said.

Under state law, which essentially mirrors federal regulations, debt collectors generally can't discuss the debt with anyone other than the debtor or the debtor's attorney.

Bill collectors also can't use threats of harm or obscene or profane language, and may not contact the debtor before 8 a.m. or after 9 p.m. or use the telephone to annoy.

Collectors also are prohibited from making false or misleading statements, such as implying that the debtor will be arrested, or that the creditor will file a lawsuit when it can't or doesn't intend to do so.

Threats about garnishing wages also often violate the law, Mr. Sumner said, since the state allows garnishing in only special cases, such as for child support and back taxes.

Experts advise consumers contacted by a bill collector to write a letter requesting verification of the debt. Mistakes are made, so the collection agency simply could have the wrong person.

"I pity the John Smiths of the world because they probably are getting collection calls for other people," Mr. Sumner said.

Consumers who don't believe they owe the money should dispute the claim by certified mail within 30 days of receiving the collection notice.

Consumers also can stop a debt collector from making further contact by writing a so-called "shut-up" notice demanding that communications cease. The approach doesn't make the debt go away, however, and could push the creditor into suing.

"That's a powerful tool, but probably best used when the consumer doesn't owe the debt," Mr. Kane said.

Consumers who believe they've been victimized by a debt collector can file a complaint with the state consumer protection bureau or the FTC, which rely on tips to build cases against offenders by establishing a pattern of abuse.

Consumers also have the right to sue within one year of the alleged violation.

Of course, many problems can be avoided by contacting creditors directly to work out a repayment plan at the first sign of having difficulty paying a bill.

Even so, consumers who fall behind shouldn't have to endure lies and abuse, regulators said.

"We expect companies to be reasonable in their debt collection activities. We don't want to hear they are harassing people," Mr. Sumner said.

"It's a legal business and they serve a role. We're just asking that they comply with the law."

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