When the pandemic ended travel in March 2020, Lew Moore relinquished the lease on his Nashville, Tennessee apartment, which he had rented as an Airbnb since his marriage a few years earlier. Moore, 51, messaged through the building’s secure portal and thought he would lose his deposit and that would be the end of it. But a few months later, a debt collector called, claiming he owed $ 3,000 while his $ 1,400 apartment was rented monthly. âThere were all these fees, and none of it was in the lease,â he recalls.
Moore contacted a consumer law firm, Sue the Collector, which successfully sued the collection agency for violating its rights. The debt was canceled and he received a check for $ 1,000 for damages. “They were trying to collect a debt inappropriately. They were trying to collect a debt that was not due,” says Moore. “There have been several strikes against them.”
In the aftermath of the pandemic, a wave of bad debts and associated illegal collection practices is developing. âDebt collection lawsuits are exploding right now,â says Jarred Dean Johnson, founder of Franklin-based Sue the Collector, Tenn. “Over the next two years, we’re going to be overwhelmed.” Marc Dann, a Cleveland-based consumer lawyer and former Ohio attorney general, is preparing for the assault by training consumer lawyers across the country. âThe chaos that will follow the COVID experience is going to require an army of consumer protection lawyers,â Dann said.
Debt buyers buy old debts from companies that consumers originally dealt with, often for pennies on the dollar, and aggressively seek to repay them. In 2020, the Federal Trade Commission registered 82,700 consumer complaints regarding debt collection, up 10% from the previous year.
Federal law dictates what collectors can and cannot do in pursuit of debt, lines some collection agencies cross. For example, under the Fair Debt Collection Practices Act, they cannot harass, threaten, or lie to you, and they cannot disseminate false credit information about you or engage in other unfair practices. If a violation of the law is proven in court, individuals can receive up to $ 1,000, as well as compensation for attorney fees and actual damages.
Know your rights
Even if you owe money, debt collectors should let you know and provide information about the debt and your rights to dispute it. If you don’t acknowledge the debt or think the amount is wrong, you have 30 days to dispute the claim after a collection agency notifies you. Always do it in writing by certified mail, says April Kuehnhoff, a lawyer at the National Consumer Law Center. the Consumer Financial Protection Bureau lists sample letters to debt collectors that you can use. âThe worst practices we hear about are people collecting what we call ghost debt, accounts that don’t exist. They say, “If you don’t pay me, the police will show up at your door or immigration will show up at your door,” Kuehnhoff says. “It’s a real red flag that you are dealing with someone who is a fraudulent actor and maybe not even a real account.”
Collectors cannot call before 8:00 a.m. or after 9:00 p.m., misrepresent themselves, or use abusive language. They cannot send a recorded message to your cell phone without your permission or automatically dial your landline if you are on the do not call list. If you ask them in writing to stop contacting you about a debt, they must comply. Unless debt collectors don’t know how to reach you, they can’t contact a third party, such as an employer or a family member. Collection agencies cannot tell a third party that you have a debt, send you a postcard, or mail letters in an envelope marked to indicate debt collection. Any single violation of these restrictions could entitle you to legal damages up to this limit of $ 1,000.
A growing problem is collectors pursuing debts the collection of which is prohibited due to statutory limitation periods, which can vary from three to ten years. If you make a partial payment on a debt that is too old to collect, you risk restarting the clock. Collectors can encourage you to do this by offering to âsettleâ an old debt. “The word ‘settle’ is closely related to legal proceedings. It carries with it the idea that you can be sued,” says Kuehnhoff, who adds, “All of this can be very misleading for consumers.”
Be skeptical of calls and emails from collectors, says Dann. âAsk for a verification of this debt before you even consider paying an overdue amount,â he says.
A consumer lawyer in your state can advise you on the statute of limitations or possible violations of federal law and will take the cases on an emergency basis. You can find someone through the National Association of Consumer Advocates and learn more about the National Center for Consumer Law.
Most important: Don’t ignore anything from a court about a debt because if you don’t respond or show up as required, you risk a default judgment against you.. In April Michigan prosecutors indicted three fraud attorneys for allegedly tampering with documents to show process servers had contacted debtors, when in fact they were not told of upcoming court dates. . Before these bad actors were charged, they won judgments worth more than $ 1 million against 1,000 people, prosecutors said. âCollection companies have found that it is much easier to collect a debtor who does not appear in court; they can seize your paycheck, ask a sheriff to seize your car, âsays Johnson.
Death and Debt
Heirs and executors should also be wary of anyone seeking to recover losses from an indebted and deceased family member. âDebt collectors will regularly call the spouse and tell them you have to pay for all of this,â Johnson said. Chances are, this is not true. “Debt collectors lie. They love to collect debt no matter who owes it.”
Collectors can tap into your sense of obligation to a deceased family member, says Dave Philipps, a lawyer based in Palos Hills, Ill.. debts, âsays Philipps. People shouldn’t feel that way, he says. “There is no moral component to the debt. It’s dollars and cents.”
If your spouse dies, a joint checking account becomes your property, and joint debts become your obligation. But loans, credit cards and other debt securities held solely in the name of the deceased are a different story. “The only time the widow has an obligation to pay the debt is if she is jointly responsible for the debt,” he says. “You can tell them to file a claim on the estate.”
If you are the executor of a family member’s estate, you are responsible for administering all claims against the estate, including old debts. Your family member may have racked up large medical bills or other end-of-life expenses, and these creditors rightly have a claim against the assets of the estate. However, once these assets are depleted, it is unlikely that you will be personally liable for these obligations, unless you have co-signed the original loan.
One exception is the Necessities Doctrine, a legal principle that holds a person responsible for essential living expenses incurred by a spouse. âThere may also be different rules in community property states,â says Kuehnhoff. Executors should be skeptical and ask lots of questions if they are approached by anyone about it, she said, although the claims “can be difficult to understand.”
Assets that are not part of the estate, such as irrevocable trusts and qualified retirement accounts with a named beneficiary, for example, are generally off limits to creditors. âLife insurance is not available to creditors for the payment of the debts of the deceased,â said Dann. “If your house has a transfer right on death, this automatically devolves in the name of the heir. It is not available to pay off debts unless there is already a judgment lien on the house. . “
Never make payment arrangements over the phone, no matter how official or threatening someone seems or what leverage they use. Keep a good track of phone conversations, consult with experts, and most importantly, make reimbursement decisions when you’re in the right frame of mind. âThere are a surprising number of really powerful consumer protection laws that are available to everyone in the country,â Dann said. “You are not just at the mercy of someone trying to get money from you.”