Wednesday, January 04, 2012

Newsweek: abuses by debt collectors increase, as more debt is sold

Newsweek has the latest tirade against debt collectors, with the online entry here, an article called “America’s abusive debt collectors” and referring outright to America’s “overconsumption binge”.

Abuses by collectors have increased as collection agencies are less able to recover debt from more strapped consumers.  People take jobs as debt collectors and are pushed by supervisors to break the law.

The article spends much of its space on debt buyers, who have often been individuals who put their “own skin in the game”.  In time they form little companies and hire collectors themselves. Debt is sold several times for even less on the dollar (“tersh” means tertiary, or third time).  In better times, hedge funds helped individual debt buyers.

For a couple months in 2003 (before moving back to VA), I worked for a company called RMA near MSP airport in St. Paul MN.  The company did not engage in abusive practices and actually held employees to the FDPCA.   I drove past the property in June 2011 and it looked like it belonged now to ACB, Associated Credit Bureaus.  But I imagine in the era of the Internet collection companies would worry that prospective employees would later rat on them online as “blogger journalists”.  Some companies that own debt say they have policies against employees “friending” debtors to spy on them! The Internet could have a big effect on the debt collection world.

Many collection agencies are located in the midwest, where the Central time zone makes calling easier. 

Debt buyers sometimes sue debtors.  I’m not sure of the legality of the practice.

John G Watts, an attorney in Alabama, has a video on debt buyer lawsuits: 

In 2000, I was dinged for $650 by “National Credit Systems” for a twenty year old credit card debt with Chemical Bank (originally $130) which I’m not really sure was valid; it could have fallen through the cracks of a household move from New York to Texas in 1979, though.

Handling a “statute of limitations” on an old debt is tricky; even a partial payment reopens the entire liability. 

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