Debt Collectors on the Offensive, Clogging the Courts January 15, 2010

Debt collecting is anything but small claims. In 2006, industry revenues were about $15.5 billion, according to Kaulkin Ginsberg Co., a collections-industry strategic-advice company.

A new breed of collector has transformed the debt collection industry in the last decade, purchasing defaulted credit card debt from banks, retailers and other consumer lenders. Debt buyers usually pay only pennies on the dollar for packages of unpaid bills that have limited information about both the lender and borrower. Before filing lawsuits, debt buyers attempt to recoup money via letters and phone calls.

Collectors cannot misrepresent the amount of a debt and aren’t allowed to harass consumers or falsely threaten legal action under the federal Fair Debt Collection Practices Act. However, last year, the Federal Trade Commission received 70,951 complaints against third-party debt collectors, a fivefold increase from 2000.

Complaints have soared because debt buyers more aggressively pursue accounts that have gone unpaid for several months. These firms are more likely to sue. Publicly traded Asset Acceptance Capital Corp., for example, said that in 2007, 39.9 percent of collections came via the courts, up from 28.5 percent in 2003.

The increase in litigation also has come about because of easy credit – too easy, sometimes – that has left consumers falling behind on payments. U.S. credit card debt has grown 75 percent in the past 10 years to more than $940 billion, according to the Federal Reserve.

To learn more, seniors should call 1-800-992-3275 x 1304 or visit www.debtdoctor.us.com or the DCSD website at www.debtcounsel.net

Thank you.

Jerome S. Lamet, Supervising Attorney, DCSD