Archive for August, 2010

NCO Financial Systems: A dreadful third party collection agency

Third party debt collectors break the law by violating the Fair Debt Collection Practices Act (FDCPA). The FDCPA is enforced by the Federal Trade Commission (FTC) to direct and monitor debt collection practices by third party collectors.

The FDCPA has laid down the guidelines for fair collection practices in order to protect consumers from being harassed by mean debt collectors. A creditor has a right to collect payment from you. But, debt collectors by no means are creditors; they are third party collectors and should not be allowed to browbeat you into believing their superiority.

In reality debt collectors are employed for a meager salary by debt collection agencies and are paid based on their collection abilities. Some debt collection agencies buy debts from original creditors for a discounted amount of the original debt. If a debt collector is actually successful in collecting money from you, the collectors take the major share of the money and give the creditors a share of the collection. Some creditors wash their hands off the debt by completely selling the debt. To collect payment on such debts, and to make the most of the debt, collectors resort to unethical means.

Some large financial institutions have large receivable departments like mortgage, home loan and health care companies. These companies employ ‘in house’ collectors to collect their debts. These collectors are not considered as ‘debt collectors’ by the FDCPA and therefore do not have to follow many rules under the FDCPA.

In a recent debt collection case, a consumer from Richmond, Virginia, was harassed by NCO Financial Systems for a zombie debt to such an extent that she ended up seeing a psychiatrist for depression. An NCO Financial Systems agent called her many times during the day and even night. He left messages on the voice mail box if his calls were not attended to. He called neighbors and disclosed details about her debt. He threatened to sue her, seize her vehicle and have her arrested.

NCO Financial Systems agent is a third party collector and not an ‘in house’ collector. NCO Financial Systems violated the FDCPA and can be sued by the consumer in the above case. NCO Financial Systems has countless rip off reports against it. It is considered to be the worst debt collection agency which creates zombie debts.

The FTC watches over the collection industry with eagle eyes but with so many collection agencies mushrooming in the market, the FTC acts if there are a substantial number of complaints about a particular agency.

In 2004, the FTC penalized NCO with 1.5 million dollars fine for reporting inaccurate information to the credit bureaus. Reporting wrong information to the credit bureaus is one of the violations of the FDCPA. Despite a regular array of complaints about it, NCO Financial Systems continues to violate the FDCPA.

Article Source

Old Debts That Won’t Die

Timothy McCollough freely admits that he stopped making payments on his Chase Manhattan credit card in 1999. He says he did not have the means to pay after he was disabled by a head injury that cost him his job as a school security guard.

But more than a decade later, Mr. McCollough, who is 52 and lives in Laurel, Mont., is still haunted by the unpaid balance, which was originally about $3,000.

In 2007, he was sued a second time over the debt, and this time the suit contended that he owed significantly more: $3,816 in credit card debt, plus $5,536 in interest and $481 in legal fees. As he did the first time, Mr. McCollough sent a handwritten note to the court explaining that the statute of limitations on the debt had passed.

“I have had no dealing with any credit card in 8 1/2 years,” he wrote to the court. “The pain they caused is worth more than the money they want.”

Mr. McCollough is not the only borrower being pursued for a balance that has expired. Such claims are routinely sold on debt collection Web sites, where out-of-statute debt is for sale for a penny or less on the dollar.

In most states, it is legal for collectors to pursue out-of-statute debt, as long as they do not file a lawsuit or threaten to do so.

But some lawsuits are filed anyway, and consumer groups and even some industry consultants argue that collectors routinely harass debtors for unpaid balances that have exceeded the statute of limitations. In some cases, collectors have unlawfully added fees and interest.

“It’s so cheap, if you can work it smart, you don’t need to collect that much,” said John Pratt, a consultant to the debt-buying industry and an author of “Debt Purchasing: An Investor’s Guide to Buying Debt” (Morris Publishing, 2005). He said investors in old debt generally hoped to recoup two and half times what they paid for a group of claims.

Because collectors cannot sue on old debt, he said, they are more likely to resort to abusive tactics. “Time-barred debt is where the worst abuse has occurred towards the debtor,” he said.

In a report issued July 12, the Federal Trade Commission called for “significant reforms” in the debt collection industry and recommended that states change the murky laws that govern out-of-statute debt.

The statute of limitations for debt varies by state, generally from three to 10 years. In many states, collectors can restart the clock if they can persuade the consumer to make even a tiny payment toward the old debt. Debt collectors generally do not tell consumers that making a payment will revive the debt so it can be legally pursued.

Read more of this NY Times article here.