Wrongful and Abusive Debt Collection

Have you been a victim of debt collector abuse?

Debt collection abuse is at an all-time high. Debt collectors are competing against each other for weaker and weaker debts to collect upon, with the result that more and more consumers are subjected to debt collection efforts for debts they do not owe, or for debts which are too old to collect upon, or for debts which have been discharged in bankruptcy.

This short article is to inform you of the legal definition of debt collector abuse, and hopefully to provide you with information by which you can decide whether you have a debt collection abuse case.

What is the key to success for a debt collection abuse lawsuit?

As you might imagine, many persons want to misuse the debt collection abuse laws simply to avoid paying valid debts, and judges and debt collectors know this. The key to proving a debt collection abuse lawsuit is having proof beyond your own testimony. Chances are, your own testimony will not be believed because of the natural bias against anyone who might be perceived as trying to avoid paying a valid debt. So, to increase your chances of success in a debt collection abuse lawsuit, gets lots of evidence and testimony to support your own story. Some examples of what you might consider:

a. If a debt collector leaves an improper message on your voicemail, don’t erase it. See if you can arrange to make copies of it.

b. If you can get an abusive debt collector onto a phone speakerbox so your friends or family members can hear the conversation, this will give you more witnesses of the abusive conduct.

c. Obviously keep copies of any letters received by the debt collector, and send all of your letters to the debt collector via certified mail so you will have a record of having sent the mail and also of having had it received by the debt collector.

d. Witnesses to debt collector harassment are very important. Do you have co-workers who witnessed the debt collector calling you at work? Do you have friends or family members who witnessed the debt collector calling you repeatedly or at odd hours in the middle of the night? Line up all of your witnesses before you consult with an attorney—an attorney is much more likely to take your case if you have all of your witnesses already lined up and you can present the attorney with their names, addresses and phone numbers.

e. Keep an eye on your credit reports and on how any debt collectors report debts to your credit reports. Obviously save your credit reports and don’t forget to dispute any incorrect or incomplete information with the credit bureaus. Debt collectors are notorious for reporting debts falsely or changing information about debts when reporting them. Any such change of credit reporting information can of itself be a violation of the law and may entitle you to damages as well as a clean-up of your credit. (Go to www.socalcreditdamage.com for detailed directions on how to dispute false, inaccurate or incomplete information on your credit reports.)

Who is a debt collector as covered by the laws against debt collection abuse?

Under California law, any company that regularly collects debts, whether its own debts or someone else’s, is a debt collector and subject to the debt collection abuse laws. Thus, if a creditor such as Macy’s, Mastercard, MBNA, Bank of America, Countrywide Mortgage, Wells Fargo or your local doctor or dentist regularly collects debts, even their own debts, then they are subject to California’s debt collection laws.

Federal debt collection laws apply only to “debt collectors” in the more traditional sense: companies or persons that collect someone else’s debts. However, if a creditor collects its own debts in another name, it is subject to the federal laws. Thus, for example, if Bank of America ever collected its own debts using the name “Debt Collectors of America,” it would be subject to the federal debt collection laws as well as the California laws.

Debt collection laws also apply to attorneys or law firms that regularly collect debts.

Are debt collectors allowed to collect debts?

Sounds like a silly question, but the answer is yes. Unfortunately, my firm gets a lot of calls from people who are upset that someone is trying to collect a debt against them, and nothing more.

Debt collectors and creditors generally are allowed to try to collect the money that consumers owe them. So long as they conduct themselves lawfully, there is nothing illegal or improper about debt collectors doing their business. If your situation is simply that a debt collector is calling you over a debt which you owe, the best thing for you to do is to make arrangements with the debt collector to pay the debt. Usually they are willing to negotiate the amount of the debt and work out a payment plan and will not garnish your wages or otherwise hassle you if you stay in communication with them and make your best efforts to keep to the payment plan.

What are debt collectors not allowed to do?

There are many things that debt collectors are not allowed to do when collecting debts, even when the debts are valid debts. The following list is only a partial list of the things which debt collectors are not allowed to do when collecting debts:

a. Debt collectors may not use threats of physical force or violence in collecting debts.

b. Debt collectors may not threaten criminal prosecution for non-payment of the debt.

c. Debt collectors may not threaten to tell uninvolved third persons about your debt in an effort to humiliate or embarrass you.

d. Debt collectors cannot use obscene or profane language when contacting you to collect debts.

e. When a debt collector contacts you, he or she must correctly identify who they are, the purpose of the contact and the fact that it is an effort to collect a debt. Debt collectors cannot lie to you about who they are, who they work for or why they’re calling you. If they are not an attorney, they cannot represent to you that they are an attorney. Similarly, they cannot misrepresent to you that they are police officers, FBI officers, sheriffs or other law enforcement personnel or government officials.

f. Debt collectors cannot cause a phone to ring continuously or repeatedly to harass you, and may not call you too frequently or at odd hours to harass you. Debt collectors generally can only call you between 8 a.m. and 9 p.m., unless you give them permission to call at some other time.

g. With limited exceptions, debt collectors cannot contact your employer concerning the debt.

h. With limited exceptions, debt collectors cannot call your family members about the debt.

i. Debt collectors cannot publish to anyone a “deadbeat’s list” of persons who allegedly have not paid their debts.

j. If you advise a debt collector that you are represented by an attorney and wish to conduct all further discussions only through counsel, the debt collector must cease calling you and must thereafter only contact you through your attorney.

k. If you advise a debt collector to cease communications with you, the debt collector must do so after advising you of any additional debt collection steps that may be taken.

l. If your original contract with the creditor does not provide for attorney’s fees or other penalties, the debt collector cannot add these to the debt. Quite often we see debt collectors tack on all sorts of penalties, attorney’s fees, high interest, etc. onto debts they’re trying to collect, mostly to enhance their bargaining position with the consumers. This is often improper. If your original contract with the creditor (it could be your original credit card application) provides for penalties, high interest and attorney’s fees, then the debt collectors may be able to seek these items, but if it’s not in the original contract, the debt collectors cannot seek them.

m. Debt collectors cannot use fraudulent legal forms to collect debts. I have seen letters sent from debt collectors which closely resembled legal pleadings, so as to confuse consumers into believing that they were being sued. This is improper.

n. Debt collectors cannot solicit post-dated checks and cannot accept checks post-dated by more than five days.

What about credit reporting abuses? Do debt collectors commit credit reporting abuses which violate the law?

You bet. Credit reports have become the leashes around the necks of American consumers, and many debt collectors are the first to yank on these leashes upon any slightest provocation.

In general, debt collectors are bound by the same rules as other creditors, such as banks, mortgage companies or credit card companies: if they credit-report any debts, they must credit-report them accurately and completely. Credit-reporting a debt falsely, inaccurately or incompletely is a violation of credit reporting laws. However, what many debt collectors are supposed to do often differs from what they actually do. Among the credit reporting abuses by debt collectors I have seen:

a. Re-aging debts: most debts can appear on your credit report for seven years plus six months after date of first delinquency, and no longer. After that, the debt is no longer reportable to your credit report for most types of debts. When debt collectors buy debts, they will often credit-report them as of the date they bought the debt, even if this is years after the date of first delinquency. Thus, by re-aging debts, debt collectors give themselves several additional years to collect it. This is a violation of the law.

b. Reporting debts multiple times: we have seen many debt collectors report single debts two, three and even four times to a credit reporting agency, thereby damaging the consumer’s credit far beyond what a single reporting of the debt would do. This is a violation of the law.

c. Failing to report that debts are disputed: many consumers dispute their debts, and often with good reason. If the debt collector credit-reports the debt, the debt collector must also include any statement of the dispute that the consumer provides to the debt collector.

d. General False Reporting of Information About the Debt: debt collectors frequently overstate the amount owed by including numerous extra charges that debt collectors try to tack onto a debt when they are not allowed to do so. Like all furnishers of credit information, debt collectors frequently credit-report false, inaccurate and incomplete credit information, sometimes maliciously, sometimes by mistake.

e. Failing to reinvestigate consumer disputes: debt collectors have the same obligations of reinvestigation as other furnishers of credit information. If a consumer disputes a credit report entry with a consumer reporting agency (see www.socalcreditdamage.com for guidelines and tips on disputing false or inaccurate credit information), a debt collector must reinvestigate the debt and delete the credit reporting of that debt if the reinvestigation reveals that the way in which it was credit-reported was false, inaccurate or incomplete. As with other furnishers of credit information, debt collectors have 30 days to complete reinvestigation of debts. [Remember: the sophisticated consumer disputes by sending certified letters to both the furnisher (creditor and/or debt collector) and any credit reporting agency on whose report the derogatory credit information appears. Sending a dispute letter to the creditor or debt collector without also sending it to the affected credit reporting agency can cost you some of your legal rights.

Can debt collectors collect debts which have been discharged in bankruptcy?

We are seeing a lot of debt collectors buy debts from creditors where the debts have been discharged in bankruptcy proceedings. Debt collectors buy these debts for pennies on the dollar because they’re worthless debts in the eyes of the law.

Debt collectors cannot collect upon discharged debts unless you “affirm” (also known as “reaffirm”) the debt. If you have discharged a debt in bankruptcy proceedings, you are under no legal obligation to reaffirm the debt.

Debtors sometimes decide to reaffirm debts because they want to continue a relationship with the creditor. For instance, let’s say a debtor discharges a debt from DISH Network, and DISH cuts off his television service. When the debtor reapplies for TV service from DISH, DISH may require that he reaffirm his old debt with them. So long as the debt collector makes it very clear that the consumer is under no legal obligation to reaffirm the debt, this is permitted conduct.

However, debt collectors often try to trick, coerce or harass consumers into reaffirming debts just so the debt collector can collect them. Debt collectors may not trick consumers into reaffirming debts, and may not represent that the debtors must pay such debts or face legal consequences. Once a debt is discharged in bankruptcy, it stays that way unless the consumer, of his or her own free will, reaffirms it.

Can debt collectors collect old debts which are too old to sue upon, i.e. beyond the statute of limitations?

They can try, but this is a situation where the consumer is advised to inform himself of the statute of limitations in his or her state. Statutes of limitations vary from state to state. In California, most consumer debts are treated as written contracts, and the statute of limitations for breach of a written contract in California is four years after the date of the breach. The date of the breach will probably be interpreted as the date of first delinquency on your credit report.

What should I do if a debt collector tries to collect a debt from me that I do not owe?

Debt collectors are legally obligated to send a written communication to you within five days after they make their initial contact with you. You have 30 days from the date of receipt of that initial letter to dispute the debt. You must do so in writing, via certified mail, to the debt collector. Be professional—remember that your letter will be shown to a judge or a jury if, at a later date, you bring a debt collection abuse lawsuit against the debt collector.

When the debt collector receives a letter from you disputing the debt within the 30-day period, the debt collector is supposed to cease all collection activities until it reaffirms the debt with the original creditor. If the original creditor says that the debt is valid, then you will have to defend by providing the debt collector and the original creditor with as much proof as you can find that the debt is not valid. However, oftentimes the original creditor will cancel the debt if the consumer challenges it in a professional manner with good evidence that the debt is not valid.

What should I do if I am a victim of identity theft and a debt collector is trying to collect a debt which is on my name only because of the identity theft?

In this situation, you must file a police report and obtain a copy. While you are at the police station filing the report, obtain an “identity theft affidavit”, which you can also obtain online from www.ftc.gov (the Federal Trade Commission). Send a copy of the police report and the identity theft affidavit to the debt collector. The debt collector is supposed to cease collection upon receipt of these items. If they persist in collecting, this is debt collection abuse.

What can I expect if I bring a debt collection abuse lawsuit against a debt collector?

Under California law, you can obtain your actual damages which can include damages for mental anguish, emotional distress, inconvenience, harassment or upset. You can also get a penalty of up to $1000.00 for a willful violation of the law. Finally, the debt collector pays for your attorney’s fees and costs if you win.

Do I have to pay the attorney’s fees up front for such a case, or can I hire an attorney on a contingency or semi-contingency basis?

Depending on the case, our firm works with individual consumers on terms of representation according to the strength of the case and the consumer’s ability to pay. We handle many of our cases on a contingency or a semi-contingency basis.

There is much to know in this area of the law. The above is a primer on the topic, and is not meant as an exhaustive discourse.

I hope that you find something useful in this short article. If you are a Southern California consumer and you have any further questions, please don’t hesitate to contact the Law Offices of Robert F. Brennan, A Professional Corporation at (888) 979-9308, or at www.brennanlaw.com.