Thursday, January 1, 2009

Collection Tactics

This week I had two reports of collection agency tactics that violate any number of federal and state laws. One of them called the debtor and informed her that the caller was a deputy with her local sheriff's department. He went on to say that if she didn't make full payment before 4:00 he would be at her home to arrest her. After she called me I traced back the phone number to New Jersey. It was registered in a company name, but there is no record of that company being incorporated in any of the jurisdictions I searched. When I looked up the corporate address, it appears to be simply a mail drop.

The second incident involved a young man who was called and told that his pay would be garnished at midnight if he didn't give them a bank account number from which they could withdraw funds. He declined. Tracing back the call led to similar results.

Although the Congress passed the Fair Debt Collections Practices Act many years ago, it has done nothing to curtail the aggressive tactics of the collection agencies. In the first place, the law has no teeth. You can only obtain actual damages or the statutory damage amount of $1,000.00. These claims are too small to permit a debtor to hire an attorney and file suit.

In the second place, the collectors have simply placed themselves outside the jurisdiction. They hide - many of them, I am convinced, are offshore, with their phones simply routed through US numbers.

What needs to happen is to rethink the damages section of the FDCPA. Instead of $1,000.00 statutory damages, let's make it three times the amount of the debt. We can subject it to offset for the debt amount, but a collector who violates the law would find itself owing two times the amount of the debt to the debtor. After getting hit with a few of those, they'd clean up their act.

Then make it illegal for the collector to operate without a physical address at which they can be found. And require them to post a bond equal to the amount that they collect in a year, with that bond being used to satisfy any judgments against them. If you can't find a collector, the debtor may elect to proceed against the bond.

Now that would be a law that would have some teeth and which would help clean up an unsavory business.


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