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Sleazy Debt Collector Tactics
It may not be your debt, but it could be your problem.
Collection agencies are bullying blameless consumers into paying debts
they never owed.
By Liz Pulliam Weston MSN Money
Lisa Burk isn't Lisa Sterns, but Allied Interstate refused to believe her.
The Minneapolis collection agency repeatedly called Lisa and her husband,
Michael, according to a lawsuit filed by the Minnesota attorney general, and
demanded that the couple pay a debt owed by one Lisa Sterns. The couple,
just as repeatedly, told the collector they didn't know any Lisa Sterns and
asked the company to stop calling.
Allied ignored the couple's requests. At one point, the collector insisted
that the Burks were lying or, if Lisa Burk were not Lisa Sterns, that she
knew Sterns and could tell Allied Interstate where to find her. It took
intervention by the attorney general's office for the calls to finally stop.
The Burks' experience with abusive collection agency tactics was annoying.
Paul Alappat's encounter with a collector was expensive.
Alappat said he was called two or three times by Buffalo, N.Y., collection
agency Capital Management Services about a Chase Bank credit-card debt.
Alappat told the collector he had never possessed a Chase Bank card and
asked them to stop calling him.
When he applied for a home-equity loan two years later, however, the
collection showed up on his credit report. His lender told him that if the
$394.74 debt were not resolved, the loan couldn't be made.
"Since I was in a hurry to get the loan approved," Alappat said, "I paid the
full amount, including the interest."
Bullying the innocent
Alappat's got company. Regulators say collection agencies
increasingly are harassing innocent people and badgering consumers into
paying money they don't owe. More people complain to the Federal Trade
Commission about debt collectors than about any other industry, and consumer
attorneys say a booming trade in old, poorly documented debts is fueling the
problem.
Consider:
The FTC charged that as much as 80% of the money collected by Capital
Acquisitions and Management (CAMCO), a large debt-collection firm, came
"from consumers who never owed the original debt in the first place." These
consumers typically paid the company to stop its harassment of themselves,
their families, their friends and their co-workers. CAMCO agreed to a
$300,000 civil penalty in March 2004, but in the ensuing eight months the
problems continued. The FTC received more than 2,000 additional consumer
complaints about the company -- three times more than the agency received in
the two years prior to the settlement. The FTC eventually succeeded in
shutting CAMCO down.
In July 2005, the FTC won a record $10.2 million court judgment against
National Check Control after accusing the debt collector of illegally
threatening consumers with arrest and wage garnishment. Again, many of the
consumers targeted by National Check Control didn't owe the original debt,
the FTC said.
Allied Interstate, the company that contacted the Burks, was sued by the
Minnesota attorney general for repeatedly calling innocent consumers despite
requests to stop. Allied eventually agreed to a settlement that prohibits it
from contacting such consumers after being orally told that they don't owe
the debts in question.
Applied Card Systems hassled relatives, neighbors and employers with
repeated phone calls in its efforts to track down debtors, according to the
FTC. The company ignored requests to stop calling, and its representatives
sometimes used obscene language when its hapless targets protested that they
didn't know how to contact the debtors. The company agreed to a consent
decree that prohibits it from harassing consumers.
Collectors cross the line
Debt collectors protest that most firms are ethical, law-abiding and provide
a needed service that helps reduce borrowing costs for all consumers. But
the new economics of debt collection can encourage belligerent campaigns,
including dogged pursuit of innocent consumers.
As I discussed in "Zombie debt is hard to kill," there is now a booming
market in the pursuit of debts so ancient that they used to be considered
uncollectible. This year a whopping $110 billion of such debt is expected to
be sold to collection agencies, up from virtually nothing 10 years ago.
Because the old liabilities cost collectors as little as 25 cents for each
$100 in face value, companies can make a profit if they can get debtors to
repay even a tiny fraction. Along the way, some collectors realized they
also could squeeze money from people who didn't even owe it.
Some consumers pay because their finances are so disorganized they don't
realize the debt isn't theirs. Others are coerced into paying by illegal
threats of lawsuits or ruined credit. Some, like Alappat, pay rather than
risk losing a desired loan.
'Why are they allowed to do this?'
The collectors are nothing if not persistent. Mary Kitzmann of Alexandria,
Minn., endured four months of calls from Allied Interstate over a debt she
didn't owe before the state attorney general's office succeeded in getting
the company to admit it had made a mistake. Five months after that
admission, Allied called Kitzmann again, trying to collect the bogus debt.
Some consumers endure collection attempts from a string of different
companies as one collector sells its uncollectible debts to another.
A collector tried to dun Phyllis Maurice of Whittier, Calif., for more than
$23,000, saying she owed the money in advertising services for two
businesses: a detective agency and a psychic consultancy.
"I have been a preschool teacher for over 30 years and have never owned
(either business)," Maurice said.
Maurice enlisted the help of an attorney friend who wrote the collector a
strongly worded letter, demanding proof that the debt was Maurice's. Maurice
hasn't heard from that collector, but later she got a call from another
collection agency about the same debt.
"Why are they allowed to do this?" Maurice fumed. "What can we do to stop
these scoundrels?"
Maurice was actually fortunate because she had access to an attorney who
could advise her of the law. Many consumers have no idea of their rights in
such situations, Cox said.
Your rights and how to use them
Under the Fair Debt Collection Practices Act, collectors are supposed to
advise consumers that they have a right to dispute the debt, but that if
consumers don't do so promptly -- and in writing -- the collector can assume
after 30 days that the debt is valid.
Once collectors are notified that they've contacted the wrong party or that
the consumer denies owing the debt, the companies are supposed to provide
proof of the debts' validity. If they can't supply the proof, collections
are required by law to cease.
Of course, some collectors simply ignore laws designed to protect consumers.
But debt experts say your chances of getting a collector to back off improve
when you know your rights and assert them forcefully.
If you're contacted about a debt you don't owe:
-
Know your rights. Debtors Rights
-
Get the name of the collector, its address and a telephone
number. You can tell the collector on the phone to stop calling, but that
won't preserve your rights under federal law.
-
Send a certified letter, return receipt requested. Make it
clear the collector has contacted the wrong party, that you don't owe the
debt and that you don't want to be called again.
-
Contact regulators. If the collector continues to call, seek
help. Typically, your state's attorney general's office handles complaints
against collectors. You can also complain to the Federal Trade Commission,
which typically doesn't intervene in individual cases but may act if it sees
a pattern of abuses.
-
Monitor your credit reports. If a collection agency posts a bogus debt on
your credit report, dispute the item immediately with the credit bureaus.
Include copies of the certified letter you sent the collector and any
complaints you filed with regulators. Don't wait until you're about to apply
for a loan to check your credit report; you'll want at least a few months'
head start to dispute any errors.
-
Consider a lawsuit. Consumers can bring lawsuits against
collectors that violate the Fair Debt Collection Practices Act, either on
their own behalf or as part of a class action.
Contact the
National Association of Consumer Advocates
for referrals to attorneys who handle such cases.
Liz Pulliam Weston's
column appears every Monday and Thursday, exclusively on MSN Money. She also
answers reader questions in the
Your Money message board.

History of Banking Fraud:
The Coming Battle
By M. W. WALBERT
The Coming Battle
documents from Congressional records, newspaper reports and writings by
the founding fathers and others a chronology of events long forgotten that
shaped our fledgling nation from 1776 to 1899. Read about the manipulation
of our money and its supply, the intentional creation of recessions,
depressions and panics, manipulation of the stock markets, and the
demonetization of silver.
Secrets of the Federal Reserve
by Eustace Mullins
Eustace Mullins' carefully
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brings it to the mid 1980's
Taking Back Your Power
by Allen Aslan Heart
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