Sunday, July 09, 2006

When a Stranger Calls

The New York Times
When a Stranger Calls

As consumer debt in America balloons to previously unimaginable levels, currently $2.2 trillion and growing, the dark underside of abusive debt collection is growing along with it. Legislators and regulators should take further steps to curb the lies, harassment and intimidation coming from out-of-control collectors. At the same time, they should also look at irresponsible lending: giving additional credit cards and high-interest loans to those already deep in the red.

Sewell Chan reported in The Times last week that the number of complaints lodged against third-party debt collectors has soared, rising faster than those for any other industry. From 1999 to 2005 the number of complaints received by the Federal Trade Commission increased by a factor of six. Complaints to New York City officials have more than doubled just since 2003. With last year's draconian new bankruptcy law pushing the last resort for the financially desperate farther out of reach, those numbers are only going to rise without stepped-up enforcement.

Third-party collectors are not the original lenders — the banks or credit-card companies that set the original terms with consumers. The collection agencies buy up debt for a fraction of its value and then try their hands at shaking loose payments. Most are law-abiding, and perform a legitimate service. Debts should be settled and someone has to track down deadbeats and absconders who make borrowing more expensive for the rest of us who pay our bills on time. But a growing number of financial bounty hunters can be extremely aggressive, not to mention indiscriminate.

According to the commission, some collectors call at all hours of the night, use obscene language, falsely threaten imprisonment or the seizure of property, and even humiliate their victims by contacting family members and employers. They sometimes seek a larger amount than the borrower actually owes — if indeed it was owed in the first place. Debt collectors have gone after people who have already paid their debts and even those who never had them to begin with. Sometimes that is a result of mistaken identity, but it is also increasingly due to identity theft.

Consumers should know that they are not powerless and that they do have rights. Collectors may not call late at night without permission. In most states family members or workplaces may be called only once, and then only to locate the borrower. It is up to the collection agency to furnish written proof that the debt is valid and it cannot bother a borrower in the meantime.

If harassment continues, consumers can call 1-877-FTC-HELP (1-877-382-4357) toll-free. Last year the commission won a judgment of $10.2 million against a company for use of illegal collection tactics. Once in a while the bullies are bullied back.