• WisBusiness

Monday, March 8, 2010

Illegal debt collection practices and debt collection scams

By J.B. Van Hollen
Imagine getting embarrassing calls at work, harassing calls to your friends and family, or even threats of violence. Unfortunately, a growing number of consumers are experiencing these abusive debt collection practices, in the face of the nation's mounting consumer debt. And like every consumer crisis, the consumer debt crisis generates new consumer scams, which trick consumers into paying money they do not even owe.

According to the Federal Trade Commission (FTC), the federal agency charged with monitoring complaints against debt collectors, debt collection generates more complaints than any single industry. The number of debt collection complaints has risen significantly in the past five years, with an increase in debt collection scams seeking to collect money from consumers who owe no money. Unfortunately, Wisconsin is right in line with the national trend, seeing a rise in debt collection complaints and an increase in the number of Wisconsin consumers targeted by debt collection scams.

The typical debt collection company purchases consumer debt from the original creditor for pennies on the dollar. The debt collector then attempts to recoup any, if not all, of the original debt. Of course, it is not illegal for debt collectors to collect on a genuine debt. However, unscrupulous methods employed by some debt collectors and attempts to collect debt that is not collectable is illegal.

Some debt collectors utilize intimidating practices, such as verbal abuse, harassment, and even threats of violence in an attempt to collect money from consumers for the debts the company has purchased. Another common, but illegal practice by debt collection companies, is the attempt to collect outdated debts that are older than six years and no longer exist on a consumer's credit record, which is no longer subject to collection under state or federal law.

Particularly troubling is the recent spike in the number of debt collection scams, where scammers pose as debt collectors to persuade consumers to pay debt they do not owe. The typical scam works like this - the scammer calls the consumer and identifies itself as some type of legal enforcement agency. The scammer tells the consumer that if they do not pay a debt immediately, the consumer could be subject to loss of benefits, wages, personal property, or worse they could be arrested. Of course, debtors' prison was eliminated decades ago. The scammer then tells the consumer if they wire money immediately to pay off a portion of the debt, the remainder of the debt will be forgiven. The consumer then becomes frightened and wires the money even though they do not owe it.

The best way for consumers to protect themselves from debt collection scams, is to know their rights as a consumer. First, consumers should always investigate the debt that a collector says is owed. They can do this by contacting the creditor whom the debt collector says is owed money, checking their credit report, and checking personal records. And, even if it appears that the debt is owed, consumers should never wire money, give banking information, or a postdated check, to a debt collector.

In Wisconsin, the Wisconsin Consumer Act outlines consumer rights with respect to debt collection. In addition, the FTC enforces the Fair Debt Collection Practices Act, which also outlines consumer rights and prohibits debt collectors from engaging in unfair, deceptive, and abusive practices.

These two acts prohibit debt collectors from:
- Harassing consumers, their spouses, or any other third party.
- Using obscene language or making threats of violence or abuse.
- Threatening arrest or legal action if it is not lawful or there is no intent to do so.
- Attempting to collect any amount greater than the actual debt.
- Collecting debt that is 6 years old or older.

Consumers who believe that a debt collector has violated their rights and the practices contained in the Wisconsin Consumer Act can file a complaint with the Wisconsin Department of Financial Institutions or the Federal Trade Commission. For more information on debt collection rights go to http://www.wdfi.org/ymm/brochures/credit/debt_collection.htm.

These are challenging times for many hardworking Wisconsin consumers who are struggling to get by financially. It is critical that consumers know their rights, and know where to turn when they believe that those rights have been violated, so that scammers are not allowed to prey on consumers in this time of great economic uncertainty.

-- Van Hollen, a Republican, is Wisconsin's attorney general.


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