Debt collection lawsuits on the rise – know your rights

Fair Debt Collection Practices Act (FDCPA) lawsuits are expected to reach an estimated 11,750 cases by the end of 2010. Up 42 percent from the previous record of 8,287 last year, 877 different debt collection agencies and creditors were named in 977 distinct consumer statute lawsuits in May.

Although there is no specific reason for the increasing pace of litigation, several factors have contributed to this growth industry. Whether it is consumer advocacy websites that educate debtors or the aggressive attorneys that encourage litigation, some experts suggest that a tough economy, stricter laws, and negative media coverage have fueled the fire.

Many consumer complaints relate to violations of FDCPA provisions that are no different today than when they were enacted in 1977. Abusive language, threats of violence or of sending debtors to jail and third-party disclosure are among the abuses consumers claim debt collectors engage in while attempting to collect a debt.

Other practices consumers complain of include the attempted forced payment on time-barred debts, debts discharged in bankruptcy and debts not owed by the individual contacted. Each of these actions has been illegal since the Fair Debt Collection Practices Act was enacted more than three decades ago.

Many debt collectors have no knowledge of the circumstances surrounding the original debt, including whether the underlying debt is legitimate. Many debt collectors purchase accounts that have been written off by creditors for pennies on the dollar. Original creditors are supposed to “scrub” their portfolios, removing disputed accounts, accounts related to identity theft, accounts belonging to deceased debtors and accounts discharged in bankruptcy, before assigning them to a third-party debt collector. When creditors fail to scrub these accounts, the result may be an attempted collection of debts not legally subject to collection.

As technology has improved, the Fair Debt Collection Practices Act has not. As the FDCPA was enacted prior to the emergence of cell phones, e-mail and auto dialers, it remains unclear whether and how the law applies. Under the FDCPA, creditors may not cause a phone to ring repeatedly for the purpose of harassing debtors, nor may they place calls without meaningful disclosure of the callers’ identities. The concept of auto-dialing has led to excessive contacts and thousands of complaints to the Federal Trade Commission.

Another debt collection abuse arising from technological advancement is finding and using debtors’ cell phone numbers to contact them, in some cases imposing a per call charge on the consumer. The use of overseas agents as debt collectors, something unheard of when the FDCPA became law, is also responsible for many of the harassment complaints.

Consumer advocacy groups such as the National Association of Consumer Advocates say tougher laws and penalties for violations, in addition to stricter enforcement are needed to stem the growing tide of collection agency abuses.

“Consumers have a whole host of rights under state and federal law they are unaware of,” says Paul Herman, an attorney with the Fair Credit Law Group, and member of NACA. “One phone call to a consumer protection attorney can often solve a problem, but debtors are often afraid to take the first step.”

A bill that would give state agencies more control over abusive debt collection practices was recently signed by Gov. Charlie Crist.  Appropriately termed “The Debt Collection Bill” (SB 2086), the measure provides greater authority to the state attorney general and the Office of Financial Regulation in punishing abusive debt collectors and bringing charges against them.

“With a struggling economy, many Floridians are suffering financially and are more vulnerable to abusive debt collectors,” said Attorney General Bill McCollum. “This bill takes important steps to protect consumers who are experiencing financial hardships, and I am glad to see it signed into law.”

If you are being harassed by a debt collector, file a complaint with the Florida Attorney General at and the Office of Financial Regulation at The Federal Trade Commission also offers a consumer collection guide detailing your rights at

William E. Lewis Jr. is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

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