Are They Coming After You?
Do you think that if you don’t have any past due bills that you won’t have to deal with abusive debt collectors? Think again. Walter Robinson and Beth Healy of the Boston Globe are back this morning, following up on their terrific four-part series on debt collection. The Globe has more stories about how debtor collectors harass people, but this story should tip over everyone's cereal bowls. It is about how collectors pound--and keep pounding--on the wrong people. Are you next?
Debt collection is the new Wild West—shoot first and don’t ask any questions—ever. The stories in the Globe are about trying to collect debts from people who don’t own them—mistaken identity, trying to collect from family members, or just plain old who-knows-how-the-mistake-made claims. The fact that these people don’t owe the debts doesn’t deter the debt collectors—they just keep coming.
Each person who gets these calls is on their own. As a lawyer, I could figure out some responses, but the bottom line is pretty much the same. These people who paid every bill in their lives on time and in full are going to spend hours of anguish, dealing with ugly threats and harassing calls, writing letters, sending documents, making calls—all with no guarantee of success.
A handful will go to lawyers. A few will get someone who cares at the state Attorney General’s office or send a complaint to the Federal Trade Commission. One in a million will get picked up in a Boston Globe story. But the best outcome that most of these people can hope for is that if they spend a lot of time and effort, the bad stuff might stop. That’s a heck of deal for people who have been harassed because of someone else’s mistake.
The debt collectors know that most people can’t figure out any effective remedy. That’s why they keep on calling. And, according to the stories in the article, if the company finally decides it can’t collect anything from someone who says “you’ve got the wrong guy,” it bundles up that person’s name with thousands of others and sells it to another debt collector to start the game over again.
In the debates over the proper role for government, isn’t this one a no-brainer? Why isn’t there a government agency given a working budget and some real teeth, putting out a toll-free number to take complaints and intervening in every one of these cases?
This isn’t about protection for deadbeats or even for people down on their luck. We all have a stake in putting some meaningful rules in place.
This is a really difficult thing to deal with, because our laws favor creditors. The debtor (or alleged debtor) is assumed guilty until proven innocent. The lender rarely has to prove the debt in court. I can tell you this from personal experience. The attorneys are some of the highest paid in the country, and are sharp litigators. They are good at getting people to say things that put the burden of proof on them. So they have to prove they don't owe the alleged debt. It is very difficult, if not impossible, to prove something doesn't exist. That is why this debt collection game is taking this turn. It is a way to legally rob people.
I have found an effective way to fight this. There is a book called "Beating Up On Debt Collectors" by Richard Cornforth. Those who follow his approach keep from making the mistake of making statements of fact that turn the tables against themselves. His method, used from the very first contact by a debt collector (primarily 3rd party debt collectors) that forces them to prove you owe the debt. Copies of documentation sent to the FTC. If they don't cooperate, you can sue them in small claims court for $1000 per offense. If people started doing this, this legalized robbery would be much less common.
Jim Anderson
The Truth About Credit
September 13, 2006 8:43 AM | Reply | Permalink
If the demographics don't match (different SS#s and diferent birth dates) then there's no consequence to simply blowing these creeps off. Even if they report a bad dent it won't be on your record, and they have no legal recourse against you. At the extreme of course you can change your phone number if they won't quit calling. I've had to deal twice with collectors who were "fishing". One of them was apparently calling everyone in the area with a name similar to the debtor's (mine differed by the spelling of the first name and the middle initial). Another was looking for someone who had lived at my address years before (not only a different name, but the opposite gender!) In both cases I simply told them to take a hike and that was the end of it.
September 13, 2006 10:03 AM | Reply | Permalink
Obviously the government doesn't care what debt collectors do - they've hired them!
Moon
A newer, more determined taxman
As the IRS turns debt collection duties over to private agencies, what should people who owe taxes look out for?
By Rob Kelley, CNNMoney.com staff writer
September 13 2006: 4:15 PM EDT
NEW YORK (CNNMoney.com) -- The IRS isn't exactly known for its friendly phone calls, but the agency's move to hand over thousands of delinquent accounts to private agencies means the taxman may now be working the phones with even more determination.
Several companies from the debt collection industry began their efforts last Thursday. The shift will affect 12,500 taxpayers, and only those who owe less than $25,000 and don't dispute the amount owed. Essentially, the IRS is outsourcing the legwork on some of its least glamorous cases.
The three companies that will be doing the collections are CBE Group of Iowa, Linebarger Goggan Blair & Sampson of Texas, and Pioneer Credit Recovery of New York. The companies will be paid 25 percent of the amount they are able to collect.
With the move, the IRS sheds some light on a whole category of cases that it hadn't touched for years - its own agents will continue to concentrate on higher-ticket cases, where there are greater rewards for their efforts.
People are up in arms about the change. Concerns lie with four main issues.
Hoped-for efficiencies won't occur Nina Olson, head of IRS' Taxpayer Advocacy group, argues that outsourcing won't actually save the agency money, because IRS workers will still ultimately have to deal with many of the cases, and because the program will initially consist of 55 IRS employees overseeing 75 private collectors. The Taxpayer Advocacy group is an internal department meant to improve the agency's responsiveness to taxpayers.
Though private collectors won't handle cases where the amount owed is in question, taxpayers may want to dispute interest and penalties. And while an IRS agent is qualified to handle such questions, private debt collectors are not - those cases will have to go back to the IRS anyway.
Potential pressure by private collectors In addition, Olson worries about taxpayers dealing with less-experienced collectors. Currently, IRS agents are supposed to work with taxpayers and are required to explain their options to them. The concern is that private collectors will pressure debtors to pay up-front when they may not be financially ready to.
"IRS collection personnel and private debt collectors have different objectives," said Olson in an email. "When IRS personnel are working a case, their objective is to maximize the long-term compliance of the taxpayer, even if that means compromising collection of a past debt. When private collectors are working cases, they are being paid as a percentage of past debts collected, so their objective is to maximize the immediate collection without regard to long-term compliance."
Shady tactics? Then there's the question of shady tactics. "When the legislation [allowing private collection] was passed in 2004, advocates talked about the success of the federal student loan program in using private collectors," said Wu. "But from the consumer's point of view, it hasn't been a success story."
She said there have been a number of problems with the program, and debt collectors had been caught employing such unjust tactics as printing the Department of Education's location as their return address, and sending misleading telegrams through Western Union.
Security breaches? And the last thing many taxpayers want to see is that the IRS has given out information about their tax returns to a company they've never heard of, says Tom Oschenschlager, Vice President of Taxation at the American Institute of Certified Public Accountants (AICPA).
How taxing?
As IRS Commissioner Mark Everson points out, a majority of U.S. states already use private firms to collect delinquent taxes.
And all of the employees involved in the project will have received extensive training both from their firm and from IRS, and will have gone through an extensive background check, said Joe Householder, a spokesman for collection firm Linebarger Goggan Blair & Sampson.
"The No. 1 priority for the IRS and all three firms is taxpayer privacy and security," Householder told CNN. "We're using the highest security standards in the industry to protect the space where the information will be held, and we'll be subject to constant scrutiny by the IRS."
He said that Linebarger presently does debt collection for many other federal agencies, including the Environmental Protection Agency and the Department of Defense, and will collect nearly $1 billion for the government across all levels - country, state and federal - in 2006.
"The tax gap last year was a huge number, and it's a burden on people who do pay," he said. "Taking an extra step to reduce the gap benefits the rest of us."
But those watching the program aren't so sure that the basic incentives underlying the program are healthy.
"In theory the contracted employees are under the same rigorous ethical rules as the IRS - the Boy Scout Oath basically," said Benson Goldstein, Technical Manager at the AICPA, the nation's largest professional group of accountants. "But you can see a tension in the system when the debt collection agency only gets compensated when the taxpayer pays up."
Critics have voiced concern that the companies could emphasize their installment plans - and neglect to mention other payment options for people who really can't afford it.
"There are a lot of rights and remedies for taxpayers that private collectors either don't know about them or they try to steer people away because it's not as profitable," said Chi Chi Wu, Staff Attorney at the National Consumer Law Center.
"The people who are most knowledgeable about IRS programs are IRS employees," she said. "And the debt collection industry has a fair amount of turnover, so it's possible you could be dealing with an inexperienced collector."
Take the example of a low-income taxpayer who owes the IRS $10,000 from several years back.
Under the previous IRS system, he may have only gotten the occasional letter from the IRS - and possibly ignored it. No one had ever called him on the phone.
Now an agency will be sending him a letter, followed by a phone call, hoping to initiate a payment plan immediately. But the taxpayer may have deep credit debt and want to settle that first. Goldstein fears that the collection agency won't inform the taxpayer of all his options - including the possibility that debt could be reduced.
The IRS offers payment plans for people who lack the means to pay the full sum immediately, and as a last resort people who owe may file to enroll in the Offer in Compromise (OIC) program to negotiate the amount owed.
The taxman cometh
What should you do if you have an overdue tax bill and a collector calls you up?
If you cannot pay what the company asks for, call them and explain your financial situation in depth, recommends the NCLC, and make sure not to over-promise what you can pay.
If explaining the situation doesn't lessen the immediate demands of the collectors, you can write the collector a cease letter detailing why you can't pay and what your prospects are in the near future, and federal law requires them to stop collection attempts.
If such a letter doesn't work, get a lawyer to write you a letter - which will force collection agencies to stop contacting you.
Besides the IRS, Low Tax Clinics are available to provide advising and other assistance to taxpayers struggling with debts. (IRS document: Low Income Taxpayer Clinic List)
The IRS says that private collection agencies will be held to the same standards of service as the agency requires of its own employees, and your privacy will be maintained.
September 13, 2006 1:24 PM | Reply | Permalink
Baaaaad advice... If you are lucky, there is no consequence. You have to preserve your rights by responding. Otherwise you risk getting sued and losing, even though it isn't your debt.
You haven't been hit yet by the collectors who purchase debts and will collect for a bill that has already been paid. I've had a collector purchase a debt that was settled with a credit card company, and try to collect it again. The account went through two bank mergers and was assigned a new account number. They reported it to the credit bureaus and I could not get the credit bureaus to remove it, because the collector would "verify" it. They reported it twice, once under the old account number and again under the new account number. After a year of fighting with the credit bureau, only then did they merge the two dings on my credit report. They only way they would remove the collection company's reference, was irrefutable proof from me. They wouldn't accept the settlement letter, because it had the wrong account number. I asked the collector to show me a contract, and they simply send another collection letter, even though I am disputing the debt. It took the correct response to them to get them to go away. I could have sued them for violating the law, and would have if they hadn't let me alone. It isn't always as simple as it seems. If they have the wrong SSN, it is clearly easy, but what if they do have your SSN and it isn't your debt? It happens more frequently than you may think.
Jim Anderson
The Truth About Credit
September 13, 2006 1:32 PM | Reply | Permalink
Thanks for the advice. I'm in overdue medical bills hell right now. I have very expensive Health Insurance, Blue Cross. The things they DON'T cover make one's head spin. Unfortunately my kid got sick. You don't question the doctors or ask "is this test really necessary" when it's your kid. You just say OK.
I'll pay them all off.... eventually. Frankly, I know they've been at least 75% or more compensatedd, so they'll have to waitt
heh.
Making the Medicos wait. I like that. :)
CSPAN junkies visit http://spannerbackup.ipbhost.com
September 13, 2006 3:10 PM | Reply | Permalink
Just another example why we need national health care. I have several other examples on my blog that I have discussed this month.
Satellite Sky Blog
Find the Truth. Do Justice.
September 13, 2006 5:36 PM | Reply | Permalink
It is a very common tactic for identity thieves to switch two numbers of their SSN so that it goes on someone else's credit report.
One common form of bankruptcy fraud that was somewhat common a few years ago was that people filing bankruptcy would do the same thing. That way, the bankruptcy never showed up on their credit report, it showed up on someone else's. It was for this reason that the U.S. Trustees instituted the change in the 341 meetings (meeting of creditors) to require that debtors bring proof of their SSN to the meeting so that their number could be verified.
That is also why attorneys are now required to verify people's SSN when they come in for a bankruptcy consultation.
On another note, some of the biggest debt-related frauds comes out of the state of Utah. Salt Lake City's FBI office is the largest in the U.S. for white-collar crime. Sometimes creditors who are making these mistakes are making them because of people who skirt the law by cleverly changing their names and using relatives or friends houses to hide out. When called, they then claim that "no such person lives there."
That is the other side of the equation.
Satellite Sky Blog
Find the Truth. Do Justice.
September 13, 2006 5:44 PM | Reply | Permalink
Where are the candidates with the simple bravery to propose firmly outlawing all third-party debt collection? If people extending credit aren't willing to pursue it themselves, the failure to collect should be their risk, and their expense. Nobody's forcing them to extend credit. Nor is the current over-extension of credit a positive social factor. Let those who create the risks take the risks.
September 13, 2006 5:57 PM | Reply | Permalink
Identity theft is of course a much more serious matter, though there are some legal protections (but we need much more). If you reread my post I am talking about situations where debt collectors are simply on a wild goose chase, calling people with similar names or addresses where debtors used to live (via a address-phone number look up) but haven't in years, and you have no idea who these people really are. In these types of cases the creditors aren't going to be able to sue you because you can very easily prove you aren't the person they are looking for. In my examples above my name is Jon P Frazier, not John E Frazier, and the social security numbers and birth dates were no match (I did end up giving the collector who called my DOB and the last four digits of my social to prove he had the wrong guy; this was NOT identity theft, as I at first feared, just a case of the collector looking up people with a name similar to the missing debtor). In the other example where I was called about a debt owed by a lady who had lived at my address 10 years before, they would have been laughed out of court had they tried to pursue me for a debt owed by a Ms. Rebecca so-and-so, though it was annoying that I continued to get phone calls and mail looking for this lady.
September 14, 2006 3:21 AM | Reply | Permalink
It doesn't have to be a case of identity theft. It could be a debt you already paid off, or a debt you have successfully disputed in the past when you were wrongly charged. It could be an administrative error, etc.
I think you'd be surprised what takes place in the courtroom when you are fighting a debt collector. Common sense doesn't always visit there. It is all about the court rules, which can be misused to bring the judge to the wrong conclusion. What may seem obvious, isn't. Good luck finding an attorney to defend you, if it appears to that attorney after a brief evaluation that they have a copy of a credit application with your signature on it, or some other seemingly conclusive proof. (this is not proof according to the standards of evidence, but that doesn't matter in collection cases it seems.) The creditor could have charged your account with anything they wanted, they'll turn to you for proof you didn't make that purchase, unless you know how to prevent that. It is unikely you will prove a negative. The application could be used to prove you owe on an account that was never yours, etc. There are numerous ways for creditors to get around the law. Unless you know what to do, your legal rights are worth nothing.
Jim Anderson
The Truth About Credit
September 14, 2006 7:52 AM | Reply | Permalink
I see your point, but does that justify the manhandling of suspected debtors as if they owed a debt they dispute like scumbags? I'd venture to say no. The collection industry is out of control, and citizens need to learn their rights and how to enforce them. If they don't fight back, they are endorsing the manhandling of innocent people.
Is it worth sacrificing our constitutional rights in the interest of protecting lenders from collecting finance charges on loans, and making risky loans more profitable than good ones? By passing laws to protect lenders, we are encouraging them to make risky loans, and then rape and pillage those people when they fall on hard times. Lending this way is destructive to society. Clamping down on the downtrodden because of a few criminals passes the cost of those crimes to poor and middle class - not the lenders who are responsible for making those loan decisions. We need to start making the lenders take the risks of lending. They'll lend less, and people will live within their means.
Jim Anderson
The Truth About Credit
September 14, 2006 8:03 AM | Reply | Permalink
Some Facts:
1. Debt collectors must stop calling if you inform them on the phone or write them a letter telling them to do so, if they don't this is harassment. You have these rights under the Fair Debt Collection Acts and Practices (FDCPA). Tell them you know your rights and you know when they are violated.
2. Collectors cannot go into your bank account unless you let them. If you are dumb enough to give them your bank account numbers they will surely take more that you wanted.
3. Collectors cannot have your wages garnished. If they tell you this they are not telling you the truth.
4. A bad debt goes off your credit history after 7 years.
5. Banks rarely go after a debt through civil action unless the debt is large enough.
The information Warren has been reporting needs to be cleared, my facts come from consumer advoctes and consumer websites, and the Fair Debt Collection Acts and Practices.I hope that takes the FEAR out what has been reported here. It takes living in the Middle Class long enough to know these fact. If anything the Middle Class needs to be more informed than before they start making more.
September 14, 2006 1:33 PM | Reply | Permalink
"The No. 1 priority for the IRS and all three firms is taxpayer privacy and security," Householder told CNN. "We're using the highest security standards in the industry to protect the space where the information will be held, and we'll be subject to constant scrutiny by the IRS."
Why did the letters F E M A scroll in front of my eyes as I read this?
"It is unknowable how long that conflict [the war in Iraq] will last. It could last six days, six weeks. I doubt six months."Rumsfeld-Feb.2003
September 14, 2006 2:09 PM | Reply | Permalink
Correct. I am not an attorney, but here is what I've learned. In reality, this law has no teeth unless you enforce it. If they violate this, you can sue them in small claims court for $1000 per violation, but you must have proof. If a collector is calling you, record the conversation, and simply inform them that the conversation is being recorded when they call. You don't need their consent. Simply informing them that you know your rights is not enough, you must take action.
If you give them a "cease communication" request in writing or orally, and they believe you owe the debt, it is an invitation to a lawsuit. The cease communication simply means that they cannot contact you unless they are pursuing legal action. If they want to collect the debt, they'll sue. They can decide to let it accumulate interest at 30% a year to make it worth it, and then sue for attorney's fees and collection expenses as well.
This is certainly the law. I think you'd be surprised to learn that you have given them consent already when you agreed to the original contract. If you have settled a debt, you most likely have signed away all your rights to due process in the settlement and they can sweep your account by simply making application to do so. This is not always true, it depends on your contract. If you make one payment with a bank check to the collector, they have your account number and "authorization" on file and can draft your account without your knowledge or permission. It may not be proper proceedure, but just try getting your money back. You'll have to sue for the violation. Is it worth it? Probably not. They know that.
Technically, this is true. As mentioned already, if you have signed away your rights to due process in a settlement, they can do whatever they want without suing you. They just get the court's permission by showing you have given consent. If they threaten this and you haven't agreed to waive your rights, then they are using intimidation techniques to scare you into paying. This is common practice. You have to simply take action to dispute the debt in writing demanding proof of the debt, copy the FTC, and if they refuse to cooperate write a letter confirming that you don't owe the debt because they have not shown you any evidence. If they send you a 5th generation photo copy of a credit application with your signature on it. It isn't proof that you owe the debt. The contract needs to be clearly connected with the debt, like a credit card receipt with your signature on it. They will have complied with the law, but if you handle it properly they will go away.
One other thing about this. If you have a credit card with mandatory arbitration, you may very well find you have a judgment against you without due process, and they do sweep your account. There are debtors challenging this in courts as unconstitutional, but it is still happening.
It isn't automatic. You have to make sure it comes off by monitoring your credit report.
This is true. But realize that this works both ways. Collectors will often do things that violate your rights realizing that consumers rarely go to the trouble to enforce their rights in court. It is often not worth the trouble. It is cheaper to settle. With this as the rule of thumb in handling these things, it become legalized extortion. If you can put together what looks like a case against someone to owe you money, if it isn't for too much, it is easier to settle with you. Sure beats robbing a bank, and it's legal.
It is obvious you have never been sued for a debt, rightly or wrongly. Legal rights are not respected if they are rarely enforced. The middle class are often misinformed because they can't afford to hire attorneys to fight their legal battles. So the truth is it doesn't take much to topple a typical middle class family because they are already living on the brink of financial disaster with their mortgage payments, payments on two cars, $8000 on credit cards, and two working parents just meeting the bills. Once disaster strikes, the dominos fall, and the creditors pounce. If that family doesn't know and enforce their rights, they will be worse off. There needs to be some fear, so we will be a little more cautious with our finances and start avoiding debt. I hate to say it, but things are not okay in this arena.
Jim Anderson
The Truth About Credit
September 14, 2006 2:55 PM | Reply | Permalink
We just aren't talking about the same thing here. Reareadm y comment once again. I began with: "If the demographics do not match..."
So I will reiterate: If your name is Joe Smith, with SS# 123-45-6789, birthdate of 1/1/1970, no court in this country would order you to pay a debt belonging to Josephine Smythe, SS# 555-55-5555, birthdate of 2/10/1960. In fact I suspect that if any collection agency actually filed such a suit they would end up in rather serious trouble with the court for filing a frivolous lawsuit.
September 18, 2006 4:35 PM | Reply | Permalink
One thing I'd like to clarify here. The penalty for violations of the FDCPA is not $1000 per violation, it is a MAX of up to $1000 PER ACTION. It does not matter how many violations you can document against an offending debt collector, the most you'll ever get for those multiple violations is $1000. Where a consumer might get more is if you can show, and prove, actual damages, and the law doesn't make that easy.
Debt collectors can and DO sue innocent parties, and the courts DO award judgments against the innocent for a debt that was never theirs ! I've seen many, many accounts of exactly this scenario. Some people prevail on appeal, others do not and wind up with a judgment against them for a debt that was never theirs. Lawyers are of little help, even those purporting to be 'consumer' lawyers. Unless they can see a big payday for themselves, they don't want to be bothered. They will ridiculously advise people to file bankruptcy or just pay the bill.
The FTC is pretty much useless. They will never intervene on individual complaints. They sit back and collect complaints and only when they see a nasty pattern in a HUGE number of complaints will they get off their dead arse and actually enforce the FDCPA. The FDCPA is toothless. The collection industry is not threatened by FDCPA violations, they scoff at it ! What is a $1000 fine to an industry that makes BILLIONS ??? The FDCPA needs some REAL teeth and it needs to be ENFORCED ! The 'bona fide error' defense needs to be removed from the FDCPA or seriously modified. Collection agencies hide behind it like a shield, even when they are DELIBERATELY violating the law.
Americans are woefully uneducated in their rights under the FDCPA and the FCRA, and even common law. They are scared to death to go to court, even when they are being wrongfully harrassed and sued over a debt that is not theirs. Consumer's misconceptions of the law along with the complicity of far too many judges in the debt collection mega-machine is horrendous. Most people don't know that a collector's threats to garnish their wages and place liens on property WITHOUT a judgment are just wrong.. and the threats themselves illegal.
Americans needs to be educated. The FTC needs to actually WORK and enforce the laws. The FTC smacked NCO with one of the largest fines ever back in 2004. Was it enough to stop NCO's unethical collection practices ?? I can tell you the answer to that question is a resounding NO ! They're still up to their old tricks, even though they deny it.. no surprise there. So many more violating collection agencies are laughing up their sleeves at the FDCPA .. and the FTC by extension. They expect the American consumer to be scared little sheep who don't know their rights and can be bullied. Unfortunately, they are right most of the time.
September 19, 2006 8:42 AM | Reply | Permalink
See Drt50's comment. It happens. Collectors do sue innocent parties, and win.
He is also right in correcting me, you can only be awarded up to $1000 for collection law violations, no matter how many there are named in a lawsuit. No one says you can't file seperate lawsuits for each violation. Let the collector's attorney request they be merged. I'm sure they'll succeed, but it does give you an opportunity to make a point. A problem is that you have a limitation on the number of cases you can file in small claims court. You have to do what you can to protect your legal rights against predators if you want to preserve the liberties we have.
Jim Anderson
The Truth About Credit
September 19, 2006 10:05 AM | Reply | Permalink