Debt Collection Cases Examined

A new report from the Center for Responsible Lending shows that debt collection cases have been on the rise in recent years. The report shows that one-seventh of all Americans have become the targets of companies that buy debt from other sources. The report also cites the unregulated nature of the the debt collection industry as the reason behind a number of debt collection agencies engaging in aggressive and abusive practices that could devastate a borrower’s financial future.

Debt Buyers Target Consumers in Debt Collection Cases

According to the CRL report, debt buyers and collectors capitalize on financially-distressed consumers and make billions of dollars from debt collection cases against consumers that may not even owe the amounts in question. In thousands of instances, the debt sale comes with either limited and doubtful information about the debts and borrowers. These erroneous reports often lead to the consumers being wrongfully targeted by harassing phone calls, letters, e-mails and legal actions.

Lack of Accountability in Debt Collection Cases

Lisa Stifler, the organization’s policy counsel and co-author of the report, described that the lack of accountability in these debt collection cases as “astonishing”. Ms. Stifler also detailed how numerous consumers only learn that they are the target of debt collection cases when they receive judgments for wage garnishment or bank account seizures. In some states, debt collectors have even had consumers arrested and their personal property seized for lack of payment.

How Debt Collection Cases Work

Most debt collection cases start when a bank or other lender sells the debt to a collection agency at a discount. If the debt purchaser can collect the full amount, the company makes its profit from the difference. In their efforts to pursue as much profit as possible, the debt buyers often engage in aggressive tactics, such as phone calls at all hours, threats of legal action, abusive language and misrepresentation of the amounts owed.

Targets of Debt Collection Cases

The unfortunate side of many debt collection cases involves those targeted by the more unscrupulous buyers. Since the information the debt purchasers acquire is often minimal at best, these companies often lack useful information on the consumer’s ability to pay. Some of the targets of these agencies include low-income families, military personnel, the elderly and disabled, and others living on fixed incomes.

Future Solutions to Debt Collection Cases

Mike Calhoun, the president of CRL, offers some solution to debt collection cases in the report. While Mr. Calhoun agrees that collecting debt “is an integral component of the American financial system”, he also states that the group’s concerns revolve around the practices involved in collecting that debt.

“Just as a lender has the right to collect debts owed,” Mr. Calhoun states, “borrowers should have the right to information about their debt and how it’s being handled and collected.”

Source: Center for Responsible Lending

Know Your Rights in Debt Collection Cases

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