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Consumers Say Debt Collector Abuses Continue

Consumers complain of illegal, abusive conduct as collectors defy federal, state enforcers

Jennifer Ringstaff felt nothing but relief when the repo-man came to her Virginia home recently and repossessed her Dodge Caravan.

Ringstaff said she had endured months of humiliation at the hands of debt collectors who made calls and disclosed her debt to relatives and employer.

They got so hateful on the phone that I wouldnt answer it, said Ringstaff, a mother of two children, ages 13 and 11. Its embarrassing. I was on the verge of losing my job because they [debt collec...

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    West Virginia Settles With Cambridge Credit Counseling

    Company will refund $250,000 to WV customers

    West Virginia has reached a settlement agreement with Cambridge Credit Counseling Corp. of Agawam, Massachusetts, that will result in refunds of $250,000 to hundreds of West Virginia consumers who were overcharged for the company's services.

    Cambridge targets consumers facing dire financial circumstances and offers to help them make payment agreements with creditors, commonly known as "debt management plans."

    Consumers seeking help with debt increasingly go to the Internet seeking solutions.

    Online, consumers find an endless stream of companies with slick web sites providing little to no help for these cash-strapped consumers and charging exorbitant fees for services that they may or may not provide.

    West Virginia Attorney General Darrell McGraw's office said it determined that Cambridge was providing a legitimate service that genuinely assisted consumers in making debt management plans with their creditors.

    However, prior to October 2005, Cambridge charged consumers an up-front fee that was not used to pay off the consumer's debt and was also charging consumers a monthly service fee of 10 percent.

    West Virginia's "debt pooling" statute that governs debt management plans prohibits companies from charging up-front fees and caps monthly service fees at seven percent of the consumer's monthly payment to the debt management plan.

    "Despite concerns about Cambridge's practices in the past, Cambridge has demonstrated that it is now one of the 'good guys' in an industry that is coming under increasing scrutiny by state and federal regulatory agencies," McGraw said.

    "My office plans to continue its vigilance over the debt relief industry to ensure that West Virginia consumers receive the genuine help they need and are not further victimized by companies that take their money and run."


    West Virginia Settles With Cambridge Credit Counseling...

    Feds Allege Debt Negotiation Service Is a Scam

    Clients paid but didn't get relief

    An operation billing itself as a debt negotiation company that promised to reduce consumers debt, negotiate with creditors, and stop harassment from debt collectors in exchange for various fees instead pocketed the fees and plunged consumers deeper into debt, according to the Federal Trade Commission.

    The FTC charges that Better Budget Financial Services (BBFS) and its principals, John Colon, Jr. and Julie Fabrizio-Colon, have defrauded consumers out of hundreds or thousands of dollars each, causing many to be sued by their creditors and forcing others into bankruptcy.

    The FTC has asked the court to award consumer redress to the victims. On November 3, 2004, the court entered a temporary restraining order halting the defendants allegedly illegal business practices, freezing their assets, and appointing a temporary receiver pending a preliminary injunction hearing.

    This scam has had devastating consequences for consumers who thought they were taking the right steps to get out of debt, said Lydia Parnes, Acting Director of the FTCs Bureau of Consumer Protection.

    They signed up for the defendants services in good faith and expected the company to act accordingly. Now the defendants have learned that reneging on a promise to help people settle their debt has serious consequences, too.

    The FTC received substantial assistance in bringing this case from Massachusetts Attorney General Tom Reillys Consumer Protection and Antitrust Division.

    According to the FTC, Massachusetts-based BBFS has advertised its services through Internet advertising and on its Web sites since at least August 2000. The defendants Web sites, and, claim that BBFS can negotiate with consumers creditors to reduce their debt by 50 percent.

    Consumers who contact the defendants are promised that the defendants will negotiate with consumers creditors for a non-refundable retainer fee, monthly administrative fees of $29.95 to $39.95, and 25 percent of any savings realized by a debt settlement. According to the FTC, consumers typically paid the defendants hundreds or even thousands of dollars in fees.

    The FTCs complaint states that consumers who sign up with BBFS provide the defendants with a list of all their creditors and the total amount of their debt. The defendants then tell consumers to set up a special bank account and deposit a calculated sum into the account, which will be used to pay creditors and pay BBFS its monthly fee.

    The defendants allegedly tell consumers to stop paying their creditors directly, claiming that consumers failure to pay their creditors will demonstrate a hardship condition that will enable BBFS to negotiate on their behalf. The defendants claim they will settle each creditors account once the consumer saves half the amount they owe on each debt.

    According to the FTC, BBFS also tells consumers to sign power of attorney forms, claiming that the forms will enable BBFS to contact creditors on the consumers behalf and instruct debt collectors to stop calling consumers directly. The consumers are instructed not to talk to any creditors who contact them directly. Further, the defendants allegedly tell consumers that negative information may appear on their credit reports while they are working with BBFS, but that the information is temporary and that BBFS will direct consumers to a company to get assistance repairing their credit.

    The FTC charges that, rather than negotiating with consumers creditors as promised, the defendants in numerous instances fail to contact creditors and debt collectors. Instead, consumers continue to be contacted by their creditors, receive repeated phone calls from debt collection agencies, and incur late fees and penalties on their credit accounts, increasing their debt and worsening their financial situation.

    The FTCs complaint states that the defendants in numerous instances fail to negotiate with creditors even after consumers call to let them know they have sufficient funds set aside to pay a settlement. In many cases, consumers have been sued by their creditors, resulting in them paying substantial legal fees. According to the FTC, as a result of the defendants scam, many consumers have been forced to file for bankruptcy.


    Feds Allege Debt Negotiation Service Is a Scam...

    Feds shut down debt collector that allegedly defrauded Spanish-speaking consumers

    Consumers were bilked out of $2 million they didn't really owe, FTC charges

    Collecting a debt is one thing. Collecting a non-existent debt is something else. And according to the Federal Trade Commission, a South Florida debt collection operation has been doing just that -- hounding Spanish-speaking consumers for debts they don't owe. 

    A U.S. district court judge in Miami has temporarily shut down Centro Natural Corp. and Sumore LLC pending the FTC's request to permanently put them out of business. 

    “These defendants deserve a shameful Triple Crown for fraud. They posed as government officials, used abusive debt collection practices, and ignored the National Do Not Call Registry,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We’re shining a light on fraud affecting every community, and we’re pleased that this scheme targeting Latinos has been stopped.”

    Bogus debts

    In its complaint, the FTC charged that the defendants cold-called consumers and threatened them with harsh consequences, such as arrest, legal actions, and immigration status investigations, if they failed to make large payments on bogus debts. The defendants’ telemarketers also pressured and deceived consumers into paying for unwanted products by telling consumers it would “settle” their debt.

    According to the FTC’s complaint, since at least 2011, the defendants have held themselves out as court or government officials or lawyers. They demanded that consumers pay them to “settle” phantom debts that typically ranged between $3,000 and $9,000.

    The FTC alleges that the defendants often told consumers that they could settle their debts by paying defendants hundreds of dollars. If consumers refused to pay, the defendants often continued to call and threaten them, sometimes using profane language. The defendants also kept calling consumers who asked them not to call again, regularly cold-called consumers whose phone numbers are on the Do Not Call Registry, and failed to pay fees for the Do Not Call Registry.

    The complaint charges the defendants with violating the FTC Act, the Fair Debt Collection Practices Act, the FTC’s Telemarketing Sales Rule, and failing to pay for, or abide by, the rules of the Do Not Call Registry.

    Collecting a debt is one thing. Collecting a non-existent debt is something else. And according to the Federal Trade Commission, a South Florida debt colle...

    Debt Settlement Companies Are Still Skirting New FTC Rules

    Seems the new rules haven’t stopped them from charging huge upfront fees

    Back in September, we told you about new Federal Trade Commission (FTC) rules aimed at debt consolidation companies. The rules were designed to clamp down on scam artists who dominate the debt consolidation industry. Well, it seems some of those so-called debt relief scoundrels have figured out a way around the rules.

    The FTC imposed new rules on September 27, 2010 that banned debt-fixers from engaging in telemarketing that misrepresented their services, such as promising to cut your debt in half or charging fees before services are delivered.

    Apparently, some of the debt consolidation companies are still charging those upfront fees. According to the FTC, which is responsible for regulating telemarketers, the debt settlement companies are supposed to first negotiate with a customer's creditors to whittle down the amounts owed, and then get paid for their services. Instead, many of those firms continue to collect fees amounting to thousands of dollars without making even a dent in the customer's credit card balance.

    Chris Viale, CEO of Cambridge Credit Counseling, a nonprofit consumer advocacy group, says that intead of complying with the new rules, the majority of debt settlement companies are evading them and doing everything they can to continue charging advance fees and misleading consumers.

    Cambridge Credit Counseling is one of a dozen nonprofit debt counselors that sent a letter to the FTC warning them about this situation.

    The advocate groups say debt settlement firms are targeting prospective customers via text message, Skype, Internet chats, or setting up in-person meetings claiming that these marketing techniques don't fall under U.S. telemarketing regulations. The advocates also warn that debt-fixers may pose as law firms or may hire attorneys, since lawyers are exempted from the rules.

    Evan Zullow, an attorney in the FTC's division of financial practices, says he's aware that companies are looking for loopholes and that the FTC is monitoring the industry to make sure that what they're doing actually meets the exception. He added that this alleged practice of baiting prospects with text messages and getting the consumer to make the initial call, will not exempt them from the FTC rules.

    Zullow explains that whether a debt settler's ad is on TV, radio or text, if the ad prompts a consumer to call, the companies are not allowed to charge advance fees.

    Chris Viale of Cambridge Credit Counseling told CNN that one of his organization's staffers received recently a text that asked the staffer to call to speak with a credit analyst. When the staffer called back, the rep asked if his debt totaled more than $10,000 and then transferred him to a company it claimed was a law firm that would charge a "retainer" for legal services. That retainer is basically an upfront fee.

    Just weeks after the FTC rules banning deceptive practices went into effect, the North Carolina Attorney General sued the Consumer Law Group of Boca Raton, Florida accusing it of being a debt relief company posing as a law firm. It reportedly collected $2.6 million in fees from more than 3,000 consumers in North Carolina.

    Another way to evade regulation is for debt settlement companies to move their operations offshore, similar to online gambling sites in that operate out of the Dominican Republic, Costa Rica or Panama. There are reports many debt fixing companies are now based in Bermuda.

    Debt consolidation firms have figured out a way around new FTC rules to prevent them from charging upfront fees and still not helping reduce their debt...

    Consumer Groups Decry Debt Collection Horror Stories

    Debt collectors believe they can make more money when they intimidate, critics say

    Lawyers at two consumer groups are lambasting the debt collection industry for engaging in abusive tactics and for pursuing consumers even when shown that they have the wrong person or the debt has been paid.

    Debt collectors believe they can make more money when they intimidate, threaten criminal prosecution, harass, and collect fees and charges far in excess of the real debt," the National Consumer Law Center (NCLC) and the National Association of Consumer Advocates (NACA) said.

    "Even more startling, debt buyers have learned to work the system to win judgments and coerce payments even when they have the wrong person or lack any evidence that the consumer owes the debt, NCLC and NACA wrote in a filing with the Federal Trade Commission.

    I thought I had heard it all, said John Fugate, a Texas consumer attorney whose story was described in the comments. The debt collector told the nine-year-old child of my college friend, who is the victim of identity theft, that they were going to take her mommy away forever.

    The Fair Debt Collection Practices Act was passed in 1977 to prohibit such abusive debt collection tactics. The FTC has solicited comments on the state of debt collection for a workshop October 10-11, which will take a 30-year look back at how well the Act has worked.

    Though the Act has had some success, the Senate report describing the problems that prompted Congress to pass the law in 1977 could have been written today, said Ira Rheingold, Executive Director of NACA.

    The phenomenal growth of the debt buyer industry -- which did not exist 30 years ago -- has also increased the abuses tremendously, said Lauren Saunders, Managing Attorney of NCLCs Washington, DC, office.

    Debts that may be a decade or more old are now sold in bundles to debt buyers for pennies on the dollar. Debt buyers then file cases by the thousands in overworked courts. The courts typically enter default judgments even if the collector has no proof that the consumer owed the debt, that the amount owed is legal and correct, or even that the debtor being sued is the right person, she added.

    Debts often are sold from one collector to the next, and the collector rarely keeps critical information such as proof of the original debt, a record of payments made, or efforts the consumer made with the previous collector to resolve a dispute.

    It is an Alice in Wonderland nightmare for consumers to find their old records, convince the debt collector that they have made a mistake, take time off work to go to court, and then have to begin the process all over again after the debt is sold to the next collector, said Dick Rubin, a consumer attorney in New Mexico.

    The comments also point out that, in a marked change from 1977, credit is often pushed on people who are already in strained financial circumstances.

    Frequently, creditors make their profits not from the regular repayment of the debt, but from the piling on of abusive fees and penalties. From the lack of underwriting to creditor practices that encourage default, debt collection becomes inevitable, the comments said. The comments describe abuses with credit cards, mortgage servicing, and payday loans.


    Consumer Groups Decry Debt Collection Horror Stories...

    Mortgage and debt relief scammers shut down -- for good

    Consumers who were conned will collect millions

    Defendants based in the U.S. and Canada who deceived consumers through a telemarketing scheme designed to sell them phony mortgage assistance and debt relief programs have been put out of business.

    A ruling by the U.S. Circuit Court of Appeals for the Sixth Circuit has issued a decision upholding a district court ruling that permanently bars the defendants from working in the debt relief or mortgage assistance industries, and enters judgment -- jointly and severally -- of $5,706,135.48 to be used for refunds to the injured consumers.

    “The court decision,” said Jessica Rich, Director of the Federal Trade Commission's (FTC) Bureau of Consumer Protection, “is a major win for consumers nationwide. It affirms that marketers can’t get away with using misleading sales pitches and then burying ‘disclaimers’ in lengthy documents given to consumers later.”

    Cold-call scam

    The FTC filed a complaint against E.M.A. Nationwide and several other defendants in 2012, alleging that since at least mid-2010 they operated a call center in Montreal that cold-called thousands of U.S. consumers -- including those whose numbers were registered on the Do Not Call Registry -- pitching programs that would supposedly help them pay, reduce, or restructure their mortgage and other debts.

    Based on this conduct, the agency charged the defendants with violating the FTC Act, the Commission’s Telemarketing Sales Rule, and the Mortgage Assistance Relief Services (MARS) Rule, which prohibits mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

    Lower court had it right

    The Court of Appeals upheld the district court’s conclusion that the defendants’ “initial telephone conversations used to solicit consumers consisted almost entirely of material misrepresentations” that created a deceptive “overall net impression” to induce consumers to incur very high costs for virtually worthless services.

    The court rejected the defendants’ argument that the district court needed to conduct additional fact-finding proceedings before determining that those misrepresentations were not offset or “cured” by fine-print disclaimers and clarifications in the contracts and other written materials that consumers received only after agreeing to enroll in the defendants’ programs.

    In summarizing its ruling, the appellate court wrote, “A court need not look past the first contact with a consumer to determine the net impression from that contact, and a court may consider individual advertisements or messages to determine the net impression. . . . Defendants cannot make considerable material misrepresentations to consumers and then bury corrections and disclaimers in subsequent communications. . . . Therefore, the district court did not err in granting summary judgment.”

    Defendants based in the U.S. and Canada who deceived consumers through a telemarketing scheme designed to sell them phony mortgage assistance and debt reli...

    Missouri AG suggests abusive debt collectors target minorities

    Seeks reforms to reduce "serial" debt collection lawsuits

    Aggressive and abusive debt collection practices persist, despite laws and court rulings affording debtors more protections.

    Missouri Attorney General Chris Koster says he's troubled by the fact that racial minorities appear more likely to be on the receiving end of these abuses. While it is impossible to determine who is getting the harassing phone calls, it is possible to tell who gets hauled into court.

    Koster says his state has witnessed a dramatic increase in debt-collection litigation in recent years. Charged-off debt, or debt that has been deemed uncollectable by a creditor, is often sold for pennies on the dollar. If the buyer is able to collect, the profit is huge.

    Serial law suits

    To collect the debt, Koster says these companies engage in what he calls the serial filing of debt-collection lawsuits in state court.

    Worse, he says these debt collectors file suit without bothering to find out whether a debt is even owed, what it was for, and how much it is. He says he has seen cases where the same companies sue for debts more than five or ten years old, even though the statute of limitation would normally preclude recovering a debt.

    Koster cites research which demonstrates that these litigation abuses disproportionately target racial minorities, creating “devastating long-term impacts for those who already struggle economically.”

    He says recent studies from ProPublica and other sources have shown that debt-collection lawsuits in Missouri have obtained judgments in communities with predominately minority neighborhoods.

    Missouri court takes a stand

    Earlier this year, a Jackson County, Mo., court took a firm stand on the issue of debt collectors suing consumers without finding out first if the debt was legitimate.

    Portfolio Recovery Associates LLC, one of the largest buyers of written-off debt in the U.S., tried to collect a $1,000 credit card debt from Maria Guadalupe Mejia, who insisted the debt wasn’t hers. She tried to explain that the person they were looking for was actually a man with a name that was similar, but not the same, as her name.

    In May, the judge threw out the debt collector's case, but not before the jury awarded Mejia damages of over $82 million. Despite that lesson, Gregg Lombardi, Executive Director of Legal Aid of Western Missouri, says the debt collection abuses persist.

    "Zombie debt collection agencies file thousands of cases in Missouri every year, and in virtually every one our attorneys see, they cannot prove their case in court,” Lombardi said. “They get default judgment after default judgment that they don't deserve by targeting low-income consumers who they know cannot afford to defend themselves. Then they are ruthless in collecting on those judgments.”

    Proposed reforms

    Koster has proposed reforms aimed at curbing abusive debt collection lawsuits in the state. He's proposed changes to state court rules that he said would end unscrupulous collection practices.

    The changes would require debt collectors to produce documentary proof of the debt, stop debt buyers from manipulating court procedures with stalling tactics, and strengthen the proof needed before creditors can recover for attorneys’ fees and litigation costs.

    Furthermore, consumers who want to reduce exposure to potential debt collector issues may consider consolidating their debt. Here is a link to our best debt consolidation companies resource.


    Aggressive and abusive debt collection practices persist, despite laws and court rulings affording debtors more protections.Missouri Attorney General C...

    New Debt Consolidation Rules Take Effect Soon

    FTC rules aimed at clamping down on scam artists who dominate the debt consolidation industry

    The first phase of new federal regulations protecting consumers from unscrupulous debt settlement companies takes effect September 27, part of the government's effort to corral the scam artists who dominate the industry.


    Debt settlement companies often promise desperate consumers they can reduce their credit card debt, but charge a large upfront fee. Little or no effort is made to settle the debt and the consumer is left in worse shape than before.

    The initial changes in the Federal Trade Commission regulations govern how debt relief products are marketed to consumers.

    Specifically, the new rules prohibit debt services providers from misrepresentations regarding their program, success rates or any material program features. Companies are also required to disclose potential negative consequences of a settlement and how long it might take for a consumer to realize results.

    "This is really a best case scenario for consumers," said Brad Stroh, CEO of, an online financial resource. "Consumers will now have substantial and important protections in place to ensure that they are not taken advantage of by predatory debt relief providers. At the same time, responsible providers will be rewarded for their efforts and can stand apart from less reputable companies - making it even easier for consumers to find help from the good actors in the debt relief industry."

    Phase two

    The second sets of changes take effect on October 28, 2010. This second step will restrict debt relief companies from charging any fees until the consumer has received either interest rate or principal reductions from their creditors.

    This addresses one of the most-often criticized aspects of the industry, where a debt relief company could collect up-front fees without having to resolve any consumer debt. With these changes, consumers are protected from unscrupulous providers.

    "The timing of these changes is important because the still struggling economy means that many Americans and families remain in financial peril," Stroh said.

    States take lead

    The new federal rules are designed to provide support to a number of states that have long waged a fierce battle against predatory debt settlement firms. Earlier this year Illinois passed a law to prohibit debt settlement firms from engaging in unfair and abusive practices.

    "Debt settlement operators target hardworking people with crushing credit card balances. They claim they're able to pay off your debt for a fraction of what's owed, but most times, this turns out to be a scam," said Illinois Attorney General Lisa Madigan. "They take your money and almost never reduce your debt.

    In Oregon, meanwhile, Attorney General John Kroger this year reached an agreement with Credit Solutions of America (CSA) that cracks down on the Texas-based debt settlement company's alleged practice of charging high upfront fees and encouraging consumers to quit paying their creditors.

    "CSA's existing Oregon customers may be entitled to a partial refund if they are not satisfied with the service they get," Kroger said.

    CSA is the largest debt settlement company in the country and has a national client base. Oregon consumers complained that CSA charged very high up-front fees and encouraged clients to stop paying their creditors. There were frequent allegations that a lack of effort on behalf of CSA resulted in litigation and costs levied against consumers.

    Also in 2010, Minnesota sued American Debt Settlement Solutions, Inc. of Boca Raton, Florida; Debt Rx USA, LLC of Dallas, Texas; FH Financial Service, Inc. of Dallas, Texas; Morgan Drexen, Inc. of Anaheim, California; Pathway Financial Management, Inc. of Garden Grove, California; and State Capital Financial, Inc. of Hallandale Beach, Florida, claiming the six companies violated the state's new debt settlement law.

    Read more about debt settlement and consolidation.

    New Debt Consolidation Rules Take Effect Next Week...

    Feds sue debt collection "lawsuit mill"

    Georgia firm "churns out" lawsuits by the hundreds of thou

    The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit in a federal district court against a Georgia-based firm, Frederick J. Hanna & Associates, claiming it is running a debt collection "lawsuit mill" that uses illegal tactics to intimidate consumers into paying debts they may not owe.

    The Bureau alleges that the Hanna firm churns out hundreds of thousands of lawsuits that frequently rely on deceptive court filings and faulty or unsubstantiated evidence. The CFPB is seeking compensation for victims, a civil fine, and an injunction against the company and its partners.

    “The Hanna firm relies on deception and faulty evidence to drag consumers to court and collect millions,” said CFPB Director Richard Cordray. “We believe they are taking advantage of consumers’ lack of legal expertise to intimidate them into paying debts they may not even owe. Today we are taking action to put a stop to these illegal debt collection practices.”

    The Hanna firm focuses exclusively on debt collection litigation, and its three principal partners, Frederick J. Hanna, Joseph Cooling, and Robert Winter, play an active role in the company’s business strategies and practices. The firm performs debt collection activities and typically files lawsuits if those efforts do not lead to collections.

    "Like a factory"

    The CFPB alleges that the firm operates like a factory, producing hundreds of thousands of debt collection lawsuits against consumers on behalf of its clients, which mainly include banks, debt buyers, and major credit card issuers.

    Between 2009 and 2013 the firm filed more than 350,000 debt collection lawsuits in Georgia alone. The CFPB further alleges the defendants collected millions of dollars each year through these lawsuits, often from consumers who may not actually have owed the debts.

    The CFPB alleges that the defendants violated the Fair Debt Collection Practices Act (FDCPA). Among other things, the FDCPA prohibits making misrepresentations to consumers, and specifically prohibits misrepresenting to a consumer that a communication is from an attorney. 

    The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit in a federal district court against a Georgia-based firm, Frederick J. Hanna & Asso...

    Seniors struggling with debt, debt collectors

    Feds issue tips to help older consumers deal with harassment

    Older Americans are increasingly hamstrung by debt and, as a result, debt collectors, according to a report issued by the Consumer Financial Protection Bureau (CFPB).

    The debt collection issues older Americans complain about include collectors hounding them about medical debt, attempting to collect on debts of deceased family members and illegally threatening to garnish federal benefits. 

    “It is increasingly common for older Americans to carry debts into their retirement years, and consumers living on fixed incomes often struggle to pay off these debts,” said CFPB Director Richard Cordray. “Older Americans deserve to be treated with the respect they have earned.”

    Some older consumers say they are unable to afford debt payments especially when they are retired and live on a small fixed income. They also express concern that the distress of being harassed by a debt collector aggravates existing medical conditions.

    The CFPB said it has recently noted that older adults with cognitive impairments are particularly vulnerable to harassment and scams, especially when seniors have memory problems or cannot keep track of finances. 

    Medical debt

    Older Americans describe being confused and frustrated because collectors attempt to collect medical expenses while the consumer is simultaneously attempting to correct billing mistakes or waiting for providers and insurers to resolve the medical disputes, the report said.

    For example, older consumers report frequent and repeated attempts to collect medical bills already covered by insurance. Another common complaint from older consumers is first learning about an overdue bill from checking their credit report.

    Deceased family members

    Seniors and their survivors also report being hounded about the debts of deceased family members.

    Many of the consumers complained that debt collectors continue to call or send collection letters after they have informed debt collectors that they are not personally responsible for the debt, or that there is no money left in the deceased borrower’s estate. 

    One consumer reported to ConsumerAffairs recently that a debt collector had first implied that the consumer was responsible for his mother's credit card debt. When told that he was not, the collector then said that the consumer surely wanted to protect his dead mother's credit rating.

    Some of the complaints to CFPB describe collection attempts made years after probate is concluded. The closing of probate is the last chance for settlement of debts and other obligations. 

    Illegal garnishment threats

    Older consumers also report that debt collectors sometimes threaten to garnish Social Security, Supplemental Security Income or Veterans’ benefits, even though these funds ordinarily are not subject to garnishment by collectors.

    According to the complaints, these threats cause older consumers significant distress, especially when they rely on federal benefits to pay essential living costs.

    What to do

    To help older consumers, the CFPB issued an advisory highlighting things they can do to help deal with debt collectors:

    Protect federal benefits. Consumers need to know that most federal benefits are protected in debt collection. Also, when a consumer receives federal benefits by direct deposit to a checking account, the bank or credit union is required automatically to protect up to two months of these benefits. If the consumer receives benefits on a government issued prepaid card, they usually are protected too.

    Get more information to identify the debt. Older consumers report that collectors often reject or ignore their attempts to correct instances of mistaken identification. Today’s advisory tells consumers how they can obtain more information to identify the debt. It also includes the CFPB sample letter that consumers can use to find out information about the claims being made against them.

    Dispute inaccurate debts. Many consumers complain that they often inform collectors that they do not owe the debt, do not recognize it, or believe the amount that debt collectors demand is wrong. The CFPB advisory tells consumers how to dispute the debt. It provides a sample letter to contact the debt collector.

    Stop the harassment. Older consumers complain that debt collectors make successive calls using profanity, condescension, indignation, or rage. The advisory includes a sample letter that consumers can send to request that debt collectors cease collection communications.

    See the full text of the advisory for more information. 


    Older Americans are increasingly hamstrung by debt and, as a result, debt collectors, according to a report issued by the Consumer Financial Protection Bur...

    Consumer group urges increased debt collection oversight

    Center for Responsible Lending cites "increasing abuses" within the industry

    When a consumer fails to pay a debt, the creditor will eventually turn the matter over to a collection agency, which focuses on collecting the money owed. While it isn't very pleasant for the consumer, it's the way the system works, as long as the debt collector follows the rules.

    When the collection efforts are unsuccessful, the creditor eventually writes the debt off its books. At that point, a debt collector often steps in and purchases the “bad debt” for pennies on the dollar.

    If the debt collector is successful at collecting the full amount for an account it purchased for pennies, it stands to make a lot of money. In fact, the Center For Responsible Lending (CRL) says debt collection company revenue rose 600% between 2003 and 2012.

    Nolen, of Marietta, Ga., is just one consumer who has experienced this. In a recent ConsumerAffairs post, he said there was a 5-year old charge on his AT&T bill that he disputed. He never paid it.

    Enhanced Recovery bought the paper February 2014 and immediately reported the charge as a collection, in the process dropping my credit score 100 points,” he wrote. “I learned of this action in March of 2014 after this reported collection had reduced my credit score. Now this company calls me 6 days a week at 8:30 with threats.”

    At a disadvantage

    If the AT&T charge was, in fact, legitimate then Nolen has few alternatives. AT&T is no longer the creditor, Enhanced Recovery is, since it bought the account and is no longer bound by many of the provisions of the Fair Debt Collection Practices Act.

    As buying and collecting old debt becomes a growing practice, CRL says abusive and predatory practices have proliferated, with companies trying to collect debt consumers say they do not owe. One of the most high-profile cases involved defunct video rental chain Hollywood Video.

    In 2011 thousands of former customers began getting collection calls for money they insisted they did not owe. The outcry was so loud that various state attorneys general stepped in to resolve the matter.

    Unfortunately for consumers not involved in high-profile collection cases, there are few protections when a debt collector has purchased the old debt and has become the creditor. CRL says there should be.

    Thin on documentation

    In a report CRL cites an FTC analysis that found only 6% of debt accounts purchased by some of the largest debt buyers in 2009 came with any documentation. In other words the debt collectors bought old debt without having any proof that it existed.

    CRL says debt buyers and collectors take advantage of financially-distressed consumers and extract billions of dollars in judgments for debts that may not even be owed. In many cases, it says the only information transferred is a name, last known address, and purported amount owed.

    However thin the debt information may be, CRL says it’s all that’s necessary to begin collection attempts. Common complaints from consumers include misrepresentation about the amount or legal status of the debt, harassment and excessive contact, obscene or abusive language, and unlawful threats to sue.

    Using the justice system

    In fact, debt collection cases can quickly escalate. The report shows that more and more debt buyers are going to court, suing consumers for debts owed and obtaining default judgments in their favor when consumers fail to appear in court.

    Why wouldn't a consumer show up in court if the facts are on their side? According to CRL, consumers often fail to appear because they never received notice of the lawsuit, can’t afford legal representation, or simply don’t understand the situation.

    With a default judgment in hand, a debt collector can then freeze a consumer’s bank account, garnish wages, report the judgment to a credit reporting agency, and pressure a consumer into a payment plan.

    At the most extreme, collectors in some states can have consumers arrested for lack of payment or seize personal property to satisfy a default judgment.

    Solvable problem

    What's CRL's answer? Better oversight at the federal and state levels to make sure that when a debt collector comes calling, it's for a legitimate debt and that they follow the rules.

    “We are not suggesting the dismissal of debt,” said Mike Calhoun, president of CRL. “Ensuring that debt is collected when owed is an integral component of the American financial system, and makes access to credit possible. What we’re seeing is a pattern of predatory practices when it comes to some kinds of debt buying and collection – and that’s what is concerning.”

    Calhoun says while a creditor has a right to be paid money it is owed, borrowers should have the right to information about their debt and how it’s being handled and collected.

    “With prudent oversight at the federal and state levels, there’s no reason why this problem can’t be fixed,” he said.

    When a consumer fails to pay a debt, the creditor will eventually turn the matter over to a collection agency, which focuses on collecting the money owed. ...

    Fraudulent debt relief operation shuttered

    Selling debt relief services and telemarketing are among the banned activities

    Innovative Wealth Builders, Inc., (IWB) and its three Florida-based principals -- Carly Janene Pelland (also known as Carly Zurita), Sheryl Leigh Lopez, and Tamara Dawn Johnson -- have run into a Florida buzz saw.

    A federal court judge in Florida has approved and signed a stipulated order that pretty much puts them out of business. The order prohibits the settling defendants from making any material misrepresentations in connection with advertising, marketing, promotion, offering for sale, or sale of any financial related product or service. It also includes a $9.9 million judgment against the defendants.

    The order came as a result of the defendants agreeing to settle Federal Trade Commission (FTC) allegations that they falsely promised to substantially reduce consumers’ credit card interest rates and save them thousands of dollars on their credit card debts.

    Massive misrepresentations

    According to the FTC’s complaint, IWB and its three principals violated the FTC Act by misrepresenting credit card interest rate reduction services and refund policies, and billing consumers without authorization.

    The complaint also contends the defendants violated the FTC’s Telemarketing Sales Rule by misrepresenting the debt relief services they were selling, charging a fee before providing these services, and billing consumers without their express informed consent.

    The FTC will continue to move forward with litigation against Independant Resources Network Corp. (IRN), the payment processor that allegedly assisted and facilitated the scam. In June, the FTC amended its original complaint to name IRN as a defendant in the case.

    Innovative Wealth Builders, Inc., (IWB) and its three Florida-based principals -- Carly Janene Pelland (also known as Carly Zurita), Sheryl Leigh Lopez, an...

    Debt collectors: abusive or just aggressive?

    Consumers should get familiar with the law so they know the difference

    If you are struggling to pay a debt you may find a debt collector is calling you regularly, seeking to speed up payment. This is never pleasant and, in some cases, can be illegal, depending upon how it is done.

    A number of ConsumerAffairs readers have cited General Revenue Corporation (GRC), a collection firm used by companies making student loans, as being particularly nasty. But nasty doesn't always translate into illegal.

    The Fair Debt Collection Practices Act (FDCPA), enforced by the Federal Trade Commission (FTC), is the law that governs debt collection. Consumers who owe debts should get familiar with it so they can better understand their rights and responsibilities. Let's look at some recent complaints and see how they fit with the letter and spirit of the law.

    Tara, of Atlanta, Ga., said she owed money to the Georgia Higher Education Assistance Corp. She reports that a conversation with a GRC agent escalated into what she took to be an ominous threat.

    Employer contact

    "She then threatened to seek out my employer, as if I am not trying to cooperate with my debt voluntarily," Tara wrote in a ConsumerAffairs post.

    Did this cross the line? You could certainly argue that a threat meant to intimidate the debtor violates the spirit of the law but Tara really had nothing to fear. The FDCPA allows a debt collector to contact an employer, but only to verify someone's employment or to obtain their contact information. Under the law, the collector is not allowed to tell an employer they are a debt collector or that the person they are seeking owes a debt.

    Carmen, of Southfield, Mich., said she received a bill for an incorrect amount. The bill was for $4,467.61 and Carmen says she actually owed $337.61 -- a big difference.

    "Today, I received another bill from them attempting to collect $4,467.61," Carmen writes. "Included is updated ledger from the school indicating I actually owe $337.61. They are still attempting to collect $3,100.00 more than I actually owe. Of course, they chose to be rude before they would acknowledge their error."

    Rudeness is unpleasant but no crime

    The dispute could well have been the result of sloppy bookkeeping but it sounds like Carmen was able to resolve the contentious situation with documentation. It was no doubt an unpleasant experience but rudeness, on its own, does not violate the law.

    D, of Lansing, Kan., writes to say that a GRC agent called looking for her son, who owed money for a student loan.

    "He demanded that I contact our son who had listed us as a reference," D wrote. "He used threatening tones and was extremely abusive--absolutely no tact. I tried to explain I had no recent contact with him, and after verbally abusing and interrupting me, he hung up."

    Limits on family contact

    The law allows a debt collector to call a family member about a relative's debt, but only once and only to learn how to contact the debtor. D believes she was subjected to "threatening tones" and "verbal abuse," but often that can be a matter of interpretation. Here's what the law has to say about that:

    A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.

    Specifically, the law defines unlawful behavior as threats to inflict physical violence, the use of obscene language, publication of a debtor's name or calling repeatedly with the intention to harass or annoy.

    It can be assumed that reputable debt collection firms know the law and train their collectors about where the boundaries are. But it is also a safe assumption that debt collection companies hire tough, hard-nosed agents who go right up to the legal line in their efforts to collect and sometimes cross it. The advantage they often have is they know the law. So should you.

    What to do

    If you are receiving calls from debt collectors, you should read and understand the FDCPA. You'll find it here. If you have any questions about your rights under the law, check with your state attorney general's office for advice.

    In your dealings with a debt collector, keep your cool and remain professional. If you cite certain instances of your rights under the FDCPA you will serve notice on the debt collector that you are an informed consumer. If you show you can't be intimidated, you might even find you are treated with a bit more respect. 

    If you are struggling to pay a debt you may find a debt collector is calling you regularly, seeking to speed up payment. This is usually never pleasant and...