March 8, 2014

Consumer debt collector complaints second on watchdog’s grievance list

The Consumer Financial Protection Bureau started just last summer taking complaints about shady debt collection practices, but already they've zoomed to the second most frequent type of complaint the agency receives, topped only by disputes about home mortgages.

From July 10 through Jan. 31, the federal consumer watchdog agency logged some 12,000 complaints about debt collectors -- outpacing grievances in seven other categories, including credit cards, bank accounts and student loans, according to an analysis by U.S. Pirg in Washington, D.C.

"Debt collection firms continue to employ questionable, and sometimes illegal, methods of extracting money from consumers," the consumer group's report said.

The most common complaint was about debt collectors' attempts to get money from the wrong person.

"Many consumers who don't owe debts are being harassed by lazy debt collectors who don't verify consumer identities," said Laura Murray, consumer associate with the U.S. Pirg Education Fund.

The group offered the example of a 35-year-old professor at a community college with two children who received a notice of garnishment in the mail based on a $10,000 judgment obtained by a debt buyer.

Unless he turned over 10 percent of his gross wages until the debt was paid off, a marshal would send the income execution to his employer, the notice said.

The man contacted the local marshal's office and learned that the original creditor of the alleged debt was a bank with whom he had never done business. There also was no evidence of the original creditor or the judgment on his credit report.

"Because of a debt collector's sloppy work, [the man] must take several days off work and seek legal counsel to avoid garnishments that could push his family into poverty," U.S. Pirg said.

Other leading types of debt collection complaints involved consumers being harassed by repeated calls, not being given enough information about the debts owed, and being hit for debts that had been paid.

Federal rules prohibit collectors from using false, deceptive or misleading tactics. Some key provisions include prohibiting harassing or abusive language, calls before 8 a.m. or after 9 p.m., and false claims of being a law enforcement officer.

On the plus side, the protection bureau has helped a significant number of consumers -- some 2,300 people, representing roughly 1 in 5 complaints -- get relief from shoddy debt collector practices, U.S. Pirg said. Most received non-monetary relief, such as an end to harassing phone calls.

The financial protection bureau, which was launched in 2011, is in the process of crafting new rules for the debt collection industry.

"[The bureau] can and must ensure that consumers have the tools to protect themselves from abuses and deter misconduct," said Margot Saunders, counsel to the National Consumer Law Center.

The law center urged the bureau to require debt collectors to have better information about who owes the debt before attempting to get the money.

The center also recommended that calls be limited to three per week and actual contact to once a week. And it said courts should be able to award injunctive relief to stop abusive measures.