by Josh Crank
Debtors and their attorneys in California have contributed over the last seven years to a fivefold increase in lawsuits alleging illegal debt collection practices, according to an analysis recently published by the Sacramento Bee. The surge in suits against collection agencies has intensified as the economy struggles to recover, suggesting that collectors are increasingly pushing the envelope to extract payments from debtors.
“You’re seeing more debt collection going on as the recession continues, particularly when it comes to credit card debt,” said Kevin Mallon, an attorney with Fishman & Mallon in New York City. “You’re also seeing a huge increase in student loan debt collection as these loans get outsourced to third parties that collect more aggressively.”
The majority of these lawsuits cite violations of the Fair Debt Collection Practices Act (FDCPA), which sets limits on when, how and how often collectors can contact consumers about unpaid debt. Enforcement of the FDCPA has for years been the responsibility of the Federal Trade Commission, but this responsibility is being shifted over to the newly formed Consumer Financial Protection Bureau.
In recent months, numerous high-profile lawsuits have been filed under the FDCPA. As previously reported on Lawyers.com, the FTC reached a settlement in March with the collection agency Rumson, Bolling & Associates that included more than one million dollars in fines and prohibition from the collections industry for the company’s leaders. That agency’s collectors engaged in outrageous behavior that included threats of rape, murder and even corpse desecration.
Weeks earlier, the FTC settled with another firm for tricking consumers into paying debts that had legally expired. Once a debt grows older than the statute of limitations for collection, which varies by state, collectors can no longer sue to recover it. But if the debtor makes any payment on the debt, it re-starts the clock on the statute of limitations. Asset Acceptance, one of the nation’s largest collection agencies, was accused by the FTC of making false statements to debtors to coerce them into making small payments and unknowingly reviving their debt.
Watch our video: HOW TO: Protect Yourself from Deceitful Debt Collection Practices
The FDCPA doesn’t allow consumers to dodge debt indefinitely, but it gives them a great amount of control over how they communicate and negotiate with their collectors. It prohibits collectors from calling outside the hours of 8 a.m. and 9 p.m., and from revealing details about the debt to any third parties without the debtor’s permission. The act also broadly bans any false statements, including suggestions that unpaid debts can result in criminal charges or arrest.
“Many consumers already know the basics of the FDCPA,” Mallon said. “For instance, most understand that collectors aren’t supposed to call late at night or early in the morning, that they’re not supposed to call too often and that they shouldn’t make threats or use profanity. But some of the most important parts are not widely understood, such as the ability to send cease and desist letters.”
Consumers who are frustrated with the tone or frequency of collection calls can direct collectors to cease contact under the FDCPA. By sending a certified letter to a collector explaining that no further contact is authorized, a debtor gains legal leverage to stop the calls. Collectors can only reach out again to confirm that they received the cease and desist letter or to state their intention to take legal action over the debt. Any other contact would provide grounds for a lawsuit.
Consumers who suspect collection agencies of violating the FDCPA should begin documenting the behavior of their collectors. By keeping a log of every call that includes the duration and summary of each conversation, a debtor can be better prepared to consult a consumer protection attorney.
“Unfortunately, there are some who continue to take the harassment because they don’t think they can afford to hire a lawyer,” Mallon said. But when an FDCPA violation has clearly taken place, many lawyers will take the case with the expectation that the collection agency will ultimately be ordered to pay their legal fees.
“In most cases, attorneys don’t need to charge a dime upfront to bring a suit,” Mallon said.