Debt Collector Tactics Archives

Debtors’ Prison? Still Used, though Unconstitutional

Tuesday, April 23rd, 2013 at 5:00 am  
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CBS MoneyWatch reports that, although the practice violates the Equal Protection Clause of the U.S. Constitution, about a third of states jail people for failing to pay their debts. The American Civil Liberties Union of Ohio issued a report saying that, even though sending consumers to jail for failure to pay debts is also against Ohio state law, seven of the state’s 11 counties do so. The news story noted that such a justice system “in effect criminalizes poverty.” In addition, it reported that many states institute a so-called “poverty penalty” by tacking on interest, late fees, and payment plan fees if a consumer isn’t able to pay the entire balance at once. In some places, like Florida, consumers jailed for debts don’t have a right to a public defender, while in other places, consumers are charged a fee for using a public defender. Anyway you look at it, these practices are both illegal and heartless.

Speech Analytics: A Way to Rein in Rogue Collectors?

Thursday, February 21st, 2013 at 5:00 am  
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Debt collection industry publication InsideARM published an interesting promotional article/opinion piece on the role that speech analytics can have in monitoring debt collector compliance and performance. Although written by the product marketing manager of the product being discussed, the rationale behind implementing the technology has merit. Essentially, speech analytics tracks all contacts between a debt collector and a consumer and can analyze those contacts for myriad factors, such as how a call to a wrong number is handled, whether or not voicemails comply with the Fair Debt Collection Practices Act, and whether or not a debt collector properly identifies himself or herself. Debt collection agencies can also use the software to increase productivity among its collectors. Although it’s difficult to say how effective the specific product is, theoretically it strikes us as a step in the right direction. After all, if 100% of calls by a company’s debt collectors are monitored and the agency has strong compliance standards, it follows that there would be very few violations of the FDCPA.

Your Rights Regarding Making Payments by Phone

Tuesday, February 19th, 2013 at 5:00 am  
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The debt collection industry publication, InsideARM, recently published some insights about the rules of the road when it comes to debt collectors accepting check payments over the phone. It’s worth reading the entire article, which can be found here, but these are the primary takeaways:

1. When you verbally tell a debt collector that he can electronically transfer funds from your checking account, it’s a one-time authorization.

2. You have to provide a written, signed authorization for the debt collector to do a recurring transfer (as in a monthly payment). A debt collector can call you each month for a verbal authorization.

3. With your authorization, a debt collector can create a paper check with your account information, and deposit that check in the bank. You can verbally give your permission for recurring withdrawals via a paper check facsimile.

4. A debt collector can make recurring credit card charges with your verbal authorization.

The Inside ARM article contains valuable information about your rights and the responsibilities of debt collection agencies. However, because some debt collection agencies get their wires crossed or simply run afoul of the law, we recommend that you never give a debt collection agency your bank account or credit card information. This includes sending a debt collection agency a personal check, since your account information is on the paper check. Instead, it’s best to mail a bank check or money order.

Portfolio Recovery Associates Loses TCPA Robocall Appeal

Wednesday, October 24th, 2012 at 5:42 pm  
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The U.S. Court of Appeals for the Ninth Circuit upheld a lower court’s ruling that a consumer only consents to a debt collection robocall to his or her cell phone if the cell phone number is provided on the initial credit application. In Meyer v. Portfolio Recovery Associates, the appellate court upheld a lower court’s injunction preventing the debt buyer from calling consumers’ cell phones in violation of the Telephone Consumer Protection Act. It further ruled that the lower court was correct in provisionally certifying a class in the class action lawsuit. According to the court’s opinion, the class was limited to “all persons using a cellular telephone number that ‘(1) PRA did not obtain either from a creditor or from the Injunctive Class member; and (2) has a California area-code; or (3) where PRA’s records identify the Injunctive Class member as residing in California.’”

Portfolio Recovery argued that provisional class certification shouldn’t have been granted because some of the affected consumers might have agreed to be contacted at phone numbers obtained after the original transaction. The appellate court cited a Federal Communications Commission 2008 ruling, saying, “prior express consent is deemed granted only if the wireless telephone number was provided by the consumer to the creditor, and only if it was provided at the time of the transaction that resulted in the debt at issue. Thus, consumers who provided their cellular telephone numbers to creditors after the time of the original transaction are not deemed to have consented to be contacted at those numbers
for purposes of the TCPA.”

This decision is definitely a victory for consumers, and will help to ensure that debt collectors can’t robocall consumer cell phone numbers that they have obtained through skip-tracing tactics.

Debt Collector Says the Unthinkable to Disabled VeteranDebt Collector Says the Unthinkable to Disabled Veteran

Monday, October 15th, 2012 at 2:14 pm  
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When it comes to debt collection, just when you think you’ve heard it all, another allegation comes forth that makes your stomach turn. RT.com reports that a debt collector from Gurstel Chargo allegedly told a disabled Army veteran, “If you would have served our country better you would not be a disabled veteran living off Social Security while the rest of us honest Americans work our [butts] off…. Too bad, you should have died.”

The debt collection agency, which was attempting to collect on a $6,000 defaulted student loan, seized money the veteran’s wife’s bank account – even though she was also on disability and the money is exempt from garnishment.

Although the couple is suing the collection agency for alleged violations of the Fair Debt Collection Practices Act, the $1,000 in damages provided for by the FDCPA doesn’t begin to make up for this type of egregious behavior against our nation’s heroes. There’s never been a better argument for updating the FDCPA to give it some teeth.

Debtors Prison: A Brief History

Tuesday, September 18th, 2012 at 5:00 am  
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In light of our recent blog post about debt collectors partnering with district attorneys’ offices and using DA letterhead to threaten prosecution to consumers who bounced checks, this blog entry from the Wall Street Journal is interesting. Jason Zweig provides a brief and insightful history of debtors’ prisons, noting that sentiments against jailing those in debt are found two decades before the Declaration of Independence was crafted. He notes that, in the first part of the 19th century, consumers were jailed for debts that would correlate to $25 today. At that time, 50,000 people were in jail for unpaid debts. The bottom line? In the 1800s, throwing people in jail didn’t result in increased collections. Doubtless, the same would hold true today.

Debt Collectors Partner with District Attorneys to Scare and Scam Consumers

Monday, September 17th, 2012 at 5:49 pm  
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The New York Times reports that debt collectors have partnered with district attorneys to scare – and some might say scam – consumers who have bounced checks. While writing bad checks with the intent to defraud a merchant is a crime, sometimes people make mistakes. Thanks to a program whereby debt collectors have the blessing of district attorneys to use their letterhead, consumers are threatened with jail if they do not cover their bounced checks. In truth, the chances of being prosecuted for a bounced check are one-tenth of one percent, yet those who receive the “district attorney” letters are terrified.

To make matters worse, the debt collection agencies – the New York Times cites CorrectiveSolutions and BounceBack – mislead consumers into thinking that unless they pay the check amount, a penalty, and a class in “financial accountability” that costs $150 or more, they’ll be sent to jail. The thing is, the district attorneys’ offices rarely, if ever, review the cases to see if a crime has even been committed.

Moreover, this is a widespread practice. The Times reports that debt collection agencies have agreements with more than 300 DA offices across the country. Currently, there are lawsuits challenging this practice on the grounds that debt collectors “lack the authority to threaten prosecution or to ask for fees for classes when no district attorney has reviewed the facts of the cases.”

Debt Collection Robo-Testimony

Tuesday, August 14th, 2012 at 1:33 pm  
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The New York Times highlighted yet another problematic practice regarding debt collection: the phenomena of “robo-testimony.” We’ve often discussed the practice of creditors and debt collectors using the taxpayer-funded court system as a primary debt collection tactic – almost always to the detriment of the consumer. Either the consumer is never notified about the pending lawsuit (due to “gutter service” or because the consumer has moved), or the wrong person is sued. In the absence of a defense (because the consumer doesn’t attend the court proceeding), the creditor or debt collector is granted a judgment, which may allow them to seize money from a consumer’s bank account or garnish their wages.

Many judges are uncomfortable with this debt collection tactic, but state laws often give them no choice but to rule in the debt collector’s favor. Awhile back, JPMorgan Chase got into hot water amid allegations that it engaged in “robo-signing” affidavits. Affidavits are documents submitted to the court attesting to the fact that someone has checked and verified that the consumer in question owes the amount in question. “Robo-signing” occurs when employees attest to the veracity of the information without actually checking it.

Now some judges are giving voice to another practice that has developed: robo-testimony. The Times reports that a case brought by American Express was dismissed by a judge. Jessica Silver-Greenberg, the Times reporter, wrote, “The American Express employee who testified, the judge noted, provided generic testimony about the way the company maintained its records. The same witness gave similar evidence in other cases, which the judge said amounted to ‘robo-testimony.’”

While the judges generally speak off the record, there appears to be a push to stop these questionable collection practices. Clearly, manipulating the court system and victimizing consumers by creating “verification” documents out of thin air is wrong. It is likely up to state legislators or federal regulators to put an end to these practices.

Debt Collection Industry is Embracing Text Messaging

Sunday, August 12th, 2012 at 5:15 am  
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The debt collection industry publication InsideARM reported that a June industry poll indicated that 40 percent of respondents said that their companies had incorporated text messaging as part of their collection tactics, while another 40 percent said that they would soon be doing so. The respondents that answered affirmatively indicated that they were texting consumers with consumers’ opt-in permission.

What the article didn’t discuss was when debt collection texting is legal and when texting is illegal. The “opt in” might have been in the fine print of a consumer’s original agreement with a creditor, but that doesn’t necessarily mean that it transfers to a third-party debt collector or a debt buyer. If you receive a text message from a debt collector and don’t believe you’ve given permission for him to text you, consult with an attorney.

Treasury Department Steps into Accretive Health Debate

Friday, June 29th, 2012 at 2:30 pm  
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Although it didn’t name names, the U.S. Department of the Treasury issued proposed regulations that would, among other things, protect patients from abusive debt collection practices in a healthcare setting. Although the proposed regulations are mandated by the Affordable Care Act (what some call “Obamacare”), it brings to mind the recent spotlight on Accretive Health, which allegedly delayed patient access to healthcare services in an attempt to collect on past debts. According to the Treasury Department’s press release, these regulations would serve as one condition for hospitals seeking tax-exempt status. The regulations would require charitable hospitals to:

* Provide patients with a plain language summary of the financial assistance policy before discharge and with the first three bills;
* Give patients at least 120 days following the first bill to submit an application for financial assistance before commencing certain collection actions;
* Give the patient an additional 120 days (for 240 days total) to submit a complete application;
* If a patient is determined eligible for financial assistance during these 240 days, refund any excess payments made before applying for aid and seek to reverse any collections actions already commenced.

The public has a 90-day window to comment upon the proposed rules.

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