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.

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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.

The Woodbury, N.Y., firm files debt collection suits, and it uses computer software to help prepare its cases, the New York Times reports. It also hires outside lawyers to appear in court on a per diem basis and has on staff 30 to 40 paralegals and secretaries, as well as about 60 people trying to collect debts, firm partner David Cohen said in a 2009 deposition.

One software program used by law firms, Collection-Master, can generate collection letters, summonses and lawsuits, according to the story. The plaintiffs are often debt buyers who purchased the right to collect debt from credit card companies for as little as 5 cents or less on the dollar. The debt buyers send their databases of consumers in default to law firms, which then feed the information into their software programs.

In a Times interview, Richard Rubin, a New Mexico lawyer who represents consumers in debt collection cases, criticizes the automated suits as “the factory approach to practicing law.” Other critics say the suits are sometimes based on inaccurate or insufficient information, and the huge numbers of cases are straining the court system.

The Federal Trade Commission issued a report on the debt collection system Monday that calls on states to require more information about debts in the lawsuits, according to a press release. The FTC also says states should take steps to make it less likely that collectors will sue after the statute of limitations has run.

Original article here.

Calls to the law firm’s main number aren’t being answered, and an e-mail sent to one of its employees says the firm is winding down, the Chicago Tribune reports. The firm handled thousands of checks and wage garnishments for its clients every month.

Several suits have been filed against the firm by former clients who claim the firm and principals Norman Wexler and Mitchell Wexler withheld funds from clients, the story says. One former client, the lending arm of Volkswagen, alleges the firm misappropriated $1.4 million.

The story has details on some of the litigation. A judge in the Volkswagen case issued an injunction in October that freezes the firm’s bank accounts, except for normal operating expenses. In another case filed by the state of Illinois, a judge ordered Norman and Mitchell Wexler to restore more than $900,000 to trust accounts and ordered them jailed when they missed the first installment. They made the payment later that day, their lawyer, George Grumley, told the Tribune. Grumley said the state owes the firm more money in unpaid fees than the firm owes the state.

At least one consumer whose credit card debt was being collected by the law firm was never told of the closing. “What’s going to happen to me?” consumer Dawn Estenor of Denver asked in a Tribune interview. “Is the account going to get sold someone else? Am I going to rack up more interest?”

Story published on the ABA Journal website, original article here.

Recorded Call with NCO Financial Systems

Are you a victim of unfair collection practices? Contact us for free legal representation! We collect all fees from the debt collectors not you! We stop the harassment immediately. You may also be entitled to money damages of as much as $1,000 and other damages. Unless you want the calls/letters to continue, call us!

Are you a victim of unfair collection practices? Contact us for free legal representation! We collect all fees from the debt collectors not you! We stop the harassment immediately. You may also be entitled to money damages of as much as $1,000 and other damages. Unless you want the calls/letters to continue, call us!

Federal law prohibits creditors from taking Social Security to recover a debt, but the law doesn’t say how money deposited directly into bank accounts is to be protected.

Banks that receive garnishment orders from debt collectors generally freeze customers’ accounts. This triggers overdraft, bounced-check and other fees that the bank then withdraws from the customer accounts, which has included Social Security and veterans benefits.

Customers often don’t know they can file a claim to get their funds released; even when they do, the process can take weeks or months. The practice has been the subject of articles in The Wall Street Journal.

“The rules address the increasing problem of account freezes and the hardships benefit recipients face when they cannot access life-line funds,” an administration official says. “This provides financial institutions with clear, uniform sets of rules to follow when a garnishment order is received, and provides them with protection from liability.”

The proposed new rules, to be published Wednesday in the Federal Register, will require banks that receive garnishment orders to review the accounts to see if they have received any direct deposits of federal benefits within the past 60 days.

If so, they must establish a protected amount equal to the sum of the benefits deposited. So, if the person had two deposits of $1,000 each, the protected amount is $2,000, even if the person had spent the benefits.

Under these rules, the banks and credit unions wouldn’t have to worry about whether benefits money is co-mingled with other deposits, or if there is a co-owner on the account.

Any amount above the protected amount would be handled according to the garnishment rules of each state. The rule doesn’t prohibit states from establishing a higher protected amount.

The new rule would help people like Kelly May, a 59 year-old disabled former genetic oncologist in Dothan, Ala. After Wachovia Bank froze her account in March 2009, it took Ms. May four months to get her money released.

The bank didn’t return the $100 fee it took when it froze her account.

“That’s a lot of money to me,” said Dr. May, whose sole source of income is $1,400 a month in Social Security

A spokeswoman for Wells Fargo & Co., which owns Wachovia, says collecting the garnishment fee from the Social Security was standard procedure.

The rule “should protect most account holders,” the administration official said. Financial institutions that follow these rules would be protected from lawsuits from creditors or account holders.

“This balances the interests of the account holder and the institutions,” the administration official said.

The rule allows the financial institution to collect the customary garnishment fee, typically $100, but it can’t take the fee from the protected amount. Banks can continue to take overdraft and other fees from the protected amounts, however.

The regulation would also require financial institutions to send a notice to the account holder detailing what happened, how much has been protected, and how much frozen, with information on how to contact the creditor, the court and the bank.

The rule would be jointly issued by the Treasury and the four major benefit agencies: the Social Security Administration, the U.S. Dept. of Veterans Affairs, the Office of Management and Budget, and the Railroad Retirement Board.

The new rules would protect Social Security benefits, Supplemental Security Income benefits, Veterans Administration benefits, Federal Railroad retirement benefits, Federal railroad unemployment and sickness benefits, Civil Service Retirement System benefits and Federal Employees Retirement System benefits.

After comment period, the rule could become law later this year.

“We view this as an important problem that needs to be rectified, and would issue a final rule as soon as possible,” the administration official said. The National Consumer Law Center was the primary consumer group urging the Treasury to issue new rules.

Original article posted by the Wall Street Journal:
Treasury Moves to Protect Federal Benefits

• 46.5% said debt collectors called continuously in an effort to harass them, including calling in the wee hours of the morning or late at night. Debt collectors are barred from calling before 8 a.m. or after 9 p.m., unless you give them express permission to do so. While terms like “continuously” are subject to interpretation, calling multiple times in a single day would be a violation of the law. Debt collectors also can’t shout or swear at you.
• 31.1% said the debt collector attempted to collect too much money. In some cases, they attempted to collect debts that had been discharged in bankruptcy or that were never owed. Some said the collector simply added a host of fees and charges that were not allowed by law.
• Consumers are entitled to receive a notice that stipulates how much is owed; who the debt is owed to; and what fees and charges were added to the debt in the collection process. However, the third most common complaint, coming from 25.7% of those contacting the FTC, was that the collector failed or refused to provide this notice.
• 20.9% said the collector threatened dire consequences — including having the debtor thrown in jail — if they didn’t pay up. Federal law says that the debt collectors can tell you that they’ll sue you for a legitimate debt, but they can’t threaten an action that they have no authority or intention of taking.
• 13.6% of consumers complained that the collector called them at work. If you ask a debt collector not to call you at work, they are barred by federal law from violating that request.
• 12.2% of complaints alleged that the collector revealed information about the consumer’s debt to a third party. Giving information about a consumer’s debt to an employer, co-worker or even a relative is strictly forbidden.
• 11.5% of the complaints said that the collector refused to investigate a disputed debt as required by law.
• Some 8.4% of collectors ignored the consumer’s entreaty to stop calling. Collectors must stop calling, if you ask them to. But they can sue you, if you refuse to pay or discuss a legitimate debt.

Read the full story here from Moneywatch: Top 8 Complaints About Debt Collectors.

NBC10 Interview with Tracey Davidson:

Are you a victim of unfair collection practices? Contact us for free legal representation! We collect all fees from the debt collectors not you! We stop the harassment immediately. You may also be entitled to money damages of as much as $1,000 and other damages. Unless you want the calls/letters to continue, call us!