February 5, 2010 — — Americans with overdue debts usually face a daunting parade of punishments. First come the threatening letters. Then the constant phone calls. And often, if debts remain unpaid, consumers find themselves in court, sued by collectors hoping that a favorable judgment will allow them to garnish wages or seize assets.
Fed up with what they call stalking tactics, a growing number of debtors are now suing debt collectors first. Arming themselves with consumer protection laws outlined in the Fair Debt Collection Practices Act, or FDCPA, they are suing collection agencies for a wide range of violations, such as robocalls, which are illegal, give poor reputation to debt collectors.
“The declining economy is making debt collectors more and more aggressive and people are more and more desperate,” says Steve Katz, a former debt collector who now runs a discussion board called Debtorboard for aggrieved consumers. . He points out that consumers who have lost their livelihoods often have no choice but to defend themselves against their debts in court.
According to the FDCPA Case Listing Service, an organization that tracks lawsuits, there were 8,347 lawsuits filed by consumers against collection agencies in 2009, a 55% increase from 2008 and double the number filed in 2007.
Some consumers are first-time seekers, who suddenly find themselves unable to pay their debts and feel cheated by aggressive collectors. Others, usually with debts worth tens or hundreds of thousands of dollars, sue repeatedly in the hope that favorable judgments will relieve collectors. Debt collectors sometimes refer to these consumers as “credit terrorists.”
Laura Cinquino of Hasbrouck Heights, NJ, who was laid off from two medical assistant jobs last year, is a debtor who found herself in a tug of war with a collection agency following what appeared to be a simple misunderstanding. Cinquino, who was also attending college to become a registered nurse, had failed to pay a $600 credit card bill with Washington Mutual when the bank collapsed in the financial crisis. When WaMu was taken over by JPMorgan Chase, Cinquino said, its bills started arriving in Chase envelopes. Cinquino, who said she usually pays her bills online, ignored the letters thinking they were related to her car loan. So when she received a voicemail one day from a bill collection agency, she did a double take.
“I was surprised,” she said. One of Cinquino’s main complaints was that she said the collection company, Apex Financial Management, never offered her proof that she had the right to collect. “I had no idea who they were,” she said. Cinquino has now hired a lawyer and said she wants to take legal action.
Apex Financial Management declined to comment on Cinquino’s case.
Collections industry spokespersons said companies closely adhere to FDCPA laws, but mistakes sometimes occur. They argue that the law is sometimes unclear about certain practices, such as whether or not it is legal to leave a voicemail.
“In some states you’re in violation (if you leave a voicemail) and in others it’s not an violation,” said Rozanne Anderson, CEO of the Association of Credit and Collection Professionals. “It doesn’t mean you’re a bad actor. It underscores why the FDCPA may need to be updated to reflect consumer needs and the use of modern technology.”
She points out that in many cases, consumers are suing for “technical violations.”
Thomas Stockton, CEO of a collection agency in Pennsylvania called Credit Mediators Inc., said the vast majority of collection agencies follow the rules and pointed out that American consumers often don’t understand the role collection agencies play. in the American economy. He argued that agencies collect money owed to American businesses, without trying to line their pockets, and pointed out that collection agencies collect more than $40 billion in cash each year for clients. “All that money is income that goes back to our customers,” he said, pointing out that his customers in turn pay taxes on that income, which in turn goes back to US consumers. “It’s an important part of the economy.”