Fraudulent debt collection is a growth industry, costing consumers perhaps billions of dollars every year. Yet the major media have not picked up on it. Here is what it is and how citizens can confront it.
First, let’s give the devil his due. There are people who run up debts they never intend to pay. There are people who incur debts, meaning to pay, but then suffer a setback and decide not to pay simply so that they can maintain their lifestyle. These are people who deserve to enter debt collection hell, and for them, debt collectors are a necessary evil.
There are also people who, through no fault of their own, find themselves unable to pay debts, typically because of illness or unemployment. Affordable, universal health care coverage and an abundance of good-paying jobs, not debt collection, are what these people need and deserve. Until we can deliver on good jobs and healthcare, they will suffer. They deserve protection against abusive practices such as threats and humiliation, but when a debt is legitimately owed, all we can do is support one another to get through the crisis.
And then there’s a third group: people who don’t owe any debt, but are harassed by debt collectors because fraudulent debt collection is a growth industry. In recent cases in New York State, hundreds of complaints were filed against 13 Buffalo area debt collectors:
"Benning-Smith Group employees routinely posed as law enforcement officials threatening to arrest or to physically harm consumers unless they made arrangements to pay the company.
In addition, the group allegedly sexually harassed and verbally abused customers, according to Cuomo.
"This company made lies, threats and abuse their calling cards in their efforts to manipulate and take advantage of consumer's already facing tough economic times," Cuomo said."
But this is the tip of the iceberg. In New York City:
"Between January 2006 and July 2008 the top 26 firms operating in NYC collected more than $1 billion through court judgments, allegedly obtaining many of them fraudulently.
In addition to shoddy mortgages, deed theft and usurious payday loans, there's another predator sucking money out of low income neighborhoods of color: debt buyers.
According to a study released this week by the Neighborhood Economic Development Advocacy Project these firms – which buy credit card, fines or other debts with the aim of collecting them from debtors – regularly file fraudulent lawsuits against low income, elderly and disabled New Yorkers.
In many cases, the report alleges, debts have already been paid off or forgiven....
At least 71 percent of the people sued were not notified of a lawsuit against them or were notified improperly."
In Chicago:
"The latest scam sweeping the nation has hit Chicago. It works like this: You get a phone call from a con man trying to get you to pay off a loan you never took out. To force you to pay up, the scammers threaten you and your loved ones."
The major media have not picked up on this. They are too busy researching Michelle Obama’s upper arms, John Edwards’ lover, and why Al and Tipper have separated, I suppose.
Our laws are, unfortunately, full of loopholes. Legitimate debt collectors should want to verify ahead of time that the people they are putting the headlock on are the right ones, and should want to notify them in writing that they are about to enter debt collection hell. But the Fair Debt Collection Practices Act requires that the consumer demand a specification of the debt from the collector. This simple defect in the law creates predictable consequences.
Suppose that the debt collector is targeting a person who is dead or who never existed? The debt collector is forbidden by law from communicating anything regarding the debt to the person at the other end of the phone, supposedly to protect the privacy of the debtor. But they are not forbidden from calling and calling and calling. One can use call blocking, but because of the deficiencies in caller ID, debt collectors can simply switch numbers.
Here is one reason why such abusive calling is probably fraudulent. If they were interested in actually collecting debts, they could write to the debtor, providing the privacy the law demands but also listing the steps they intend to take in case the debtor does not respond. Therefore, the collection agencies appear to be interested only in exerting pressure on the person they are calling, whether or not that person owes any debt whatsoever.
Up until now, getting redress has been difficult. However, the FTC has finally created an online complaint form that gives me hope that we can turn the tide against fraudulent debt collection here. Alternatively, you may file complaints with your state Attorney General.
In any case, this is a crime wave in the making. Those of us who are fortunate enough not to have debts need to recognize that when someone tries to put the bite on us for non-existent debt, there are probably a dozen or a hundred poor and powerless people depending on us to file a complaint, because if fraudulent debt collectors go after them, they have no chance of defending themselves.