Thursday, July 28, 2011

Collection Agencies: Predatory, Unethical and Often Illegal Practices Pursuing Money We Don't Have.

This afternoon, I got a painful reminder of the lengths unscrupulous debt collectors will go to attempt to squeeze blood from a stone, whether or not debts are legitimate. With the global economy in trouble, collection agencies are doing a booming business, even if their specific practices frequently fall outside what is allowed by law. The blatant scam and con-artist tactics used to attempt to extort money from those ignorant of the laws protecting them are just one piece of the puzzle. As the collection industry becomes more powerful, they apply political pressure and sink a whole lot of money into getting the legal system to interfere on their behalf, and the burden of proof falls on the public, many of whom are down and out, desperately trying to hold on as it is. A word before I get further into this. I've had debts in the past both legitimate and not. I ask readers to not assume anything about my financial responsibility when I write about this, and the standard disclaimer that I am not a lawyer is appropriate at this time as well.

Even both Scrooges (Ebenezer and McDuck) never stooped to the level
of many of these companies.

Advice concerning what is legal and what is not, and what the recourse for someone targeted by this sort of activity is tricky at best. For one, the laws vary wildly from country to country, and even if you are in the United States, both the laws themselves and how the courts choose to interpret them is often different at the State level. It is also worth noting that unless someone is well-versed in Fair Debt Collection Law and willing to file court paperwork themselves, many of the fines are small enough that hiring an attorney to fight to assert your rights in a matter like this is more expensive and stressful than it is worth to the average person. Illegal or quasi-legal tactics used by debt collectors is part of a numbers game. They count on ignorance of what is legal and/or hassle of defending yourself to make it profitable enough to collect from those who cannot or will not fight that the few willing and able to defend themselves do not affect the bottom line.

In the United States, there is a law called the Fair Debt Collection Practices Act. This law was put into place to protect the public from unscrupulous practices by collection agencies, and the specific restrictions of this law are frequently ignored. The law requires a collection agency to provide written proof that a debt is valid, they are not allowed to contact a person by phone at inconvenient times, and they cannot threaten violence or any legal action they do not intend to take. Further protections are in place to keep a collection agency from harassing an individual, including a prohibition on abusive or obscene language and restrictions on who may be contacted regarding the debt. Many of the tactics commonly used by collection agencies violate one or more provisions in this law, and the debt collection industry is keenly interested in weakening it as more people become aware of how to use it to protect themselves.

Important legislation, but not a "one size fits all" sword and shield against legal action.
Understand it and how it is used for you locally before assuming it can or will protect you.

Particularly angry or legally savvy individuals have taken advantage of the FDCPA to countersue collection agencies over violations of the act. Damages awarded typically include legal fees, money lost as a result of an illegal debt collection plus $1,000 per FDCPA violation. The time, expertise and expense in pursuing these cases as an individual makes it a difficult proposition for the average person. Also, in certain states, the courts are more friendly to debt collection companies than they are to the consumers, so proper research and documentation is a must when considering legal action. Cases like this are becoming more and more common, however, as the unemployment rate holds at a fairly high rate. People with a lot of time on their hands and not much money to “pay off” unscrupulous companies are more likely to file these sorts of lawsuits.

Another disturbing manipulation of the legal system by these sorts of companies has led to the modern day version of the Dickensian debtor's prison. A debtor's prison was the practice of incarcerating an individual who would not or could not settle a debt, typically indefinitely as it is difficult to raise funds to settle a debt from a cell. Officially, the practice was outlawed in the US in 1833 as a form of cruel and unusual punishment, but legal loopholes have brought the concept back. Since 2010, collection agencies have, even without proper documentation to prove validity of debts, won warrants to have debtors arrested and held until payment was either made in full or a payment plan could be arranged. Funds used toward bonds have, in many cases, been forfeited to collection agencies towards payment of debts without benefit of a process to dispute the validity of the debt itself. Public outcry over these practices has motivated states to look into the callous manipulation of the legal system, and at least one major company specializing in holding public debt has stopped the process of seeking arrest warrants. Still, thousands of these warrants have been issued under the justification of being “the only way to get some people in to settle their debts.”

Can't pay rent, don't get income, go to jail. Who knew Monopoly was training Life Skills?

Personally, I've never been subject to legal actions as a result of these sorts of practices, and have declined to file lawsuits in instances where I am certain collectors have committed FDCPA violations. Without a growing number of people willing and able to defend their rights, and others voicing their displeasure over uneven enforcement of these sorts of actions, it will continue to remain profitable to skirt the line of what is legal and what is not. I'm curious to hear the perspective of readers outside the US about whether these sorts of vultures exist in other places where people are struggling financially. What do debt collectors do in your country? Is it all legal, and if not, what can be done about it. Let me know in the comments.
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Astronomy Pirate said...

I have a fat steaming pile they can come collect.

Jay said...

this post makes me go, "fuuuuuuuuuuuuuuuuuuuu!!!!!"

The Angry Lurker said...

I thought it was bad over here in the UK with the scumbag bailiffs but obviously not as bad as the US.

Alpha said...

It's only going to get worse over time.

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