Debt Collectors Increasingly Being Accused of Flawed Procedures

By now, you’ve probably heard about the foreclosure crisis; namely, about all the questionable paperwork and procedures banks have been using to initiate foreclosures. To be honest, the foreclosure crisis wasn’t something I necessarily could have predicted, but I wasn’t all that surprised to hear about either. Whenever you have transactions that involve lots of details, and that happen at lightening speed, it’s bound to get messy.

Is it any further surprise then, to hear about the same thing happening with debt collection practices? A recent article in the New York Times reports about the questionable practices that debt collection agencies have been using. These practices involve many of the same flaws of the foreclosure crisis: flawed paperwork, flawed procedures, and basically the debt being transferred between parties too quickly without attention to details. Except, this problem looks to be more prominent than the foreclosure crisis: while not everyone may have a mortgage, almost everyone has debt and loans of some sort.

Basically, debt collection involves debt from a variety of sources. It can come from credit cards, car loans, utility bills, and so forth. Often times, finance companies and banks whom the debt is owed to will sell the debt to secondary companies for very cheap. These debt buyers will then hire collectors to collect on the debt by writing letters, making phone calls, or even suing.

The problem with all this, as you can see, is that the debt is constantly changing hands. However, the transactions are happening too quickly and not being handled with the proper amount of care that is necessary in order to ensure compliance with the law. For example, it’s not certain how many debt-collection affidavits are signed each year. But one employee of a debt buyer in New Jersey testified that in 2007, she signed 2,000 affidavits a day (that’s about one affidavit every 13 seconds). At that kind of rate, it’s impossible to verify the accuracy of anything you’re signing.

In turn, this practice results in debt collectors often going after people will no lawful basis. Debt collectors may go after the wrong person, have the incorrect address listed, or even go after people who have already won judgments against the bank. Sometimes, the secondary companies simply don’t get the required data from the primary creditor when the account is sold, since the data often makes the account more expensive.

What’s interesting though, is to note how sparingly people respond to debt collection cases against them. This results in default judgments being entered against them, and creditors have remedies of garnishing their wages or taking away money from other sources.

However, consumer lawyers argue that if people actually took legal action against debt collectors, they would be successful a large majority of the time. So what exactly can a consumer lawyer do for you in these cases?

1. First, realize that a debt collection agency is just a business (and a very aggressive one at that). They are not the IRS, not the police, or anything like that. Additionally, there are a host of laws in place that protect consumers from unfair and overly aggressive debt collection practices, such as the Fair Debt Collection Practices Act. A lawyer can help you if you believe your rights have been violated under these laws.

2. In some cases, just having a lawyer representing you is enough to have the debt collection agency drop their case. If you think about it, debt collection agencies have thousands of cases to collect upon. Since the majority of people don’t hire lawyers, a debt collection agency likely does not want to go after the case where there is a lawyer involved.

3. Even if you do concede that some debt is owed on your part, a lawyer can act as the liaison between you and the debt collector. In this role, a lawyer can negotiate with the debt collection agency to help reduce your debt, eliminate your debt, lower the payments, lower the interest rates, and so forth. A lawyer can also be the sole communicator with the debt collector on your behalf, which reduces the need for you to communicate with the collector.

There are many reasons why a debt collection agency may be contacting you, some of them valid and some of them not. But remember that collection agencies are just business operations subject to strict laws, and it definitely pays to look into their case against you. And, even if you do end up owing some debt, there are many things you can do, such as filing for the right type of bankruptcy or coming up with an alternative repayment plan.