A survey of some of the most common debt collection agency abuses and their legal remedies.
The U.S. consumer economy runs on debt. Loans allow consumers to borrow money to buy a house, attend college, or start a small business. In most cases, taking on reasonable debts is simply a fact of modern American life, and can be part of a responsible investment plan for the future. One pays the monthly mortgage on a purchased home that, over the long term, increases in value, or invests in a child’s college education in order to increase her likely job prospects and potential future salary.
Still, increased consumer debt brought about unanticipated circumstances, such as unexpected medical costs or instability in the job market, has forced some consumers to default on loans or to become submerged in high-interest credit card debt.
Increasingly, creditors faced with loans in default have opted to sell off some of this debt to third-party collection agencies, usually at a small fraction of the debt’s total value, in an effort to recoup some of their losses. By 2014, more than one out of every seven American adults has had an average of $1,500 of his or her debt fall into the hands of a collection agency, according to a 2014 report by the Center for Responsible Lending.
These agencies typically buy a portfolio of various individuals’ debts, some of which are missing pertinent information about the debtor and the specific nature or correct amount of the outstanding debt. On occasion, this process has led to cases of misunderstanding between the debtor and the collection agency, and under the worst circumstances to instances of abuse and deception by unscrupulous agencies. In fact, according to the same Center for Responsible Lending report, the Federal Trade Commission (FTC) received over 200,000 complaints regarding debt collection in 2013 alone.
When consumer debt is purchased by a third-party, the collection agency is required to contact the debtor in writing within five days with information about the creditor in question and the amount of money owed. This process is called debt validation, and establishes proper communication with the debtor. Thereafter, agencies in Colorado must adhere to the stipulations of the Colorado Fair Debt Collection Practices Act (FDCPA).
This law is designed to protect consumers from the unfair practices sometimes perpetrated by dishonest agencies, including harassment, disseminating misleading information, and other forms of abuse or deception. The act includes an exhaustive list of such unfair and unlawful practices.
These might include: 1) Threats, such as a threat to sue the debtor for unpaid debts or to garnish his or her wages, 2) False Accusations, such as accusing the debtor of having committed a crime, 3) Harassment, including intrusive telephone calls, multiple times per day, 4) Deceptive Behavior, such as misrepresenting the actual amount owed, and 5) Exacting Illegal or Unauthorized Fees other than contractual interest on the unpaid debt.
The law also prohibits agencies from contacting debtors prior to 8 a.m or after 9 p.m. Likewise, consumers who have notified a collection agency in writing that they are represented by an attorney in the matter may no longer be contacted directly by the agency, which must thereafter communicate through the lawyer.
Aside from the FDCPA (which is designed to protect consumers), a separate law called the Colorado Uniform Consumer Credit Code regulates the collection practices of creditors. This law warns against “extortionate and unconscionable conduct” on the part of the collection agency, which might include such unfair practices as harassment, use of violence or threats of violence, misrepresentation as a government agency, and unlawful exposure of creditworthiness to the consumer’s employer or the public at large.
Individuals who feel the have been subject to these or similarly unfair practices by a collection agency are encouraged to file a formal complaint with the Colorado Attorney General’s Office. The Attorney General has the power to investigate claims and bring regulatory and legal action against abusive agencies whose actions violate the FDCPA.
Those who have suffered financial damages due to a collection agency’s abuse may also choose to contact an attorney in order to file a civil lawsuit. If you believe you have suffered from unfair or unlawful practices at the hands of a disreputable debt collection agency and wish to obtain legal advice, we here at Pippenger Hedberg Law encourage you to contact us and set up a free consultation today.