What You Should Know About Collection Agencies
"Cosmopolitan" (November 1984) pp 136-143
Karen Hartney laughed when she pulled the lavishly illustrated book on
Galapagos Islands wildflowers out of her mailbox. She hadn't ordered the
book, wasn't about to pay for it, and felt no obligation to go to the
trouble and expense of returning it.
Two weeks later, she was billed $29.95, plus mailing and handling. She
threw the statement in the trash. In time, the letters grew nasty,
demanding payment and warning that her credit rating would suffer if she
didn't respond promptly. When a collection agent began calling her at work,
she snapped.
"Leave me alone," Karen hissed. "I never wanted that dumb book
anyway!"
"You might have thought of that before you decided to keep it," the man
responded. "I think the word for taking things that aren't yours is
'stealing.'"
Karen (whose name has been changed) was furious-- but also worried.
Could the collection agency harm her credit rating, contact her employer,
neighbors, landlord? Most of all, she just wanted the harassing calls and
letters to stop. Though resentful, she mailed the payment-- now a full
$37.50, including interest and collection charges.
Karen's case is not an isolated one. Despite the strong new consumer
protection laws passed in recent years, abuses still exist, and a sizeable
minority of retailers and collection agencies engage in such illegal
collection practices. Charging for unordered goods is only one of the many
activities that are prohibited by federal law. (If, by the way, you receive
unrequested merchandise as Karen did, you are under no obligation to pay.
You may treat it as a free gift, but you should notify the sender, in
writing, of your intention as soon as you receive a "bill".)
The thorniest problems occur when a debt is truly owed and a consumer,
through overextension or inadvertence, falls behind in paying it. In this
case, the account is often turned over to a collection agency, which may
behave unethically in its effort to recoup the money.
"Some of the most extreme cases we see involve actual threats of
violence," reports Diane Conner, staff attorney for the Credit Practices
Division of the Federal Trade Commission (FTC). "Children have been told
over the phone, 'Tell your parents they're going to jail tomorrow if we
don't get the money.' We've also heard about collection agencies trying to
add on illegal fees of up to 100 percent of the original debt."
Federal law protects you against such abusive practices. By knowing
which tactics are illegal and how to stop them, you can avoid being a
victum.
BEYOND THE LEGAL LIMIT______________________________________________________
The following are violations of consumer protection laws:
REPETITIVE CALLING OR CALLS AT UNUSUAL TIMES OR PLACES. Some collection
agents will call a consumer repeatedly during a single day, or telephone
late at night without permission-- both of which are clearly illegal under
the Fair Debt Collection Practices Act (FDCPA).
Calls at work are not considered "harassing" if an office is the most
convenient place for you to receive the call-- but, says Diane Conner, "If
the agent knows that your employer does not allow you to receive personal
calls at work, or if you've asked not to be contacted there, then it would
be a violation."
CALLS TO PERSONS OTHER THAN THE CONSUMER. If a collection agent has
business with you, you are the only person with whom he may discuss that
business. "We frequently hear that a collection agent has called an
employer, or perhaps a neighbor, and left an "urgent message' that the
consumer should call XYZ Collection Agency regarding payment of a debt,"
reports Bill McDonough, an FTC staff attorney. "The only motive would be to
embarass the consumer, and it's against the law."
ABUSIVE, OBSCENE, OR THREATENING LANGUAGE. Late bill payers have been
called deadbeats and bums, subjected to rude and obscene language, and given
veiled as well as direct threats of violence and imprisonment. If this
happens, end the conversation immediately, requesting that you never be
contacted again. Follow up with a brief letter barring future contact with
the collection agency. You may then wish to file a complaint with the FTC
or state consumer protection agency, or pursue private legal action.
MISLEADING THREATS OF LEGAL ACTION. No one has the right to make false
threats or to claim that legal action has been or is about to be instituted
if that's not the case. Also prohibited are papers that look like official
notices from a state agency or court of law-- including documents with
headings that mimic a common legal form (such as "Ace Collection Agency v.
Jane Consumer") or ones that use an agency name similar to that of a state or
federal agency.
OTHER ABUSIVE BEHAVIOR. Because debt collectors show infinite
ingenuity, the Fair Debt Collection Practices Act covers scores of other
forbidden tricks, from tacking on collection charges not authorized by
contract or law, to using false names and publishing lists of consumers in
debt. Realizing that it could not forsee every possible abuse, Congress
even added a prohibition against any "harassing, oppressive, and abusive
conduct"-- a general phrase that increases the power of the courts and the
Federal Trade Commission to protect you against improper collection
practices.
STEPS TOWARD SELF-DEFENSE____________________________________________________
What can you do if you're the victum of an overeager collection agency?
Your first and simplest option under the FDCPA is to request in writing that
all collection contacts stop. Once you do that, the collection agency is
not allowed to call or write to demand payment; it can only advise you of
new action, such as the referring of your account back to the creditor or
the filing of legal action.
if the harassment continues, you may wish to contact your state
consumer agency. According to Cyra Narva of the Consumer Assistance
Division of the Massachusetts State Banking Department, these agencies will
often intervene to solve the problem. "Usually," Narva reports, "the
consumer is content just to know that the rug has been pulled out from under
the collection agency and that the abusive practices will stop."
The agencies won't compensate you for their past harassment; however a
successful lawsuit might. You could bring suit under the FDCPA and, if
successful, recover a cash judgement of actual damages suffered, attorney's
fees, sourt costs, and a special statutory award of up to one thousand
dollars.
"If a consumer has been truly injured," says Willard Ogburn, deputy
director of the National Consumer Law Center, "he or she is entitled to be
compensated. The fact that attorney's fees may be recovered in a successful
case encourages some attorneys to pursue strong cases on a commission basis,
while the possibility of an extra statutory award of up to a thousand
dollars acts as an extra incentive to the consumer. Meanwhile, the public
interest is served as collection agencies learn that violating consumer
protection laws can be very expensive."
Whatever decision you make, you're sure to reap some gratification from
simply standing up for your rights and the rights of others like you.
Rudeness and abuse need never be tolerated, and you can see to it that
they're not.
+----------------------------------+ +-----------------------------------+
| STOPPING TROUBLE | | CONSUMER AGENCIES THAT CAN |
| BEFORE IT STARTS | | HELP YOU PROTECT YOURSELF |
| | | |
| Healthy credit use is not | | THE FEDERAL TRADE COMMISSION |
| inconsistent with sound | | (FTC). Your regional office |
| personal finance management, | | can advise you of your rights |
| but if you overextend, these | | and may even make an investi- |
| measures should enable you to | | gation if a collection agency's |
| resolve the problem without | | abuse has been severe or if |
| becoming vulnerable to further | | yours is one of several com- |
| embarassment or harassment: | | plaints against the same |
| | | agency. Meanwhile, let both |
| IMMEDIATELY CONTEST IN WRITING | | creditor and collection agency |
| ANY INACCURATE CHARGES, AND | | know that you've alerted the |
| REQUEST VERIFICATION. | | FTC. Their attitudes may not |
| No collection activities may | | improve, but their behavior |
| proceed until a charge is | | probably will. |
| verified: Waiting may make a | | |
| challenge more difficult. | | STATE CONSUMER PROTECTION |
| | | AGENCY. In some states, this |
| IF YOU REALIZE THAT YOU ARE | | government office can arbitrate |
| NOT GOING TO BE ABLE TO MAKE | | a dispute and order that |
| REQUIRED PAYMENTS ON A DEBT, | | abusive practices be stopped. |
| CONTACT THE CREDITOR. Most | | If your debt is undisputed or |
| are understanding and co- | | can be proved, the agency can |
| operative if you propose an | | help you negotiate a reasonable |
| alternate payment plan at the | | extended-payment plan; it may |
| first sign of trouble. Review | | also have greater power to |
| your own budget, determine a | | intervene in an individual case |
| monthly amount you can afford | | than a regional FTC office |
| to pay, then explain the | | would. |
| problem to the creditor and | | To learn what state services |
| offer to pay the lesser | | are available to protect you |
| amount. | | against collection harassment, |
| | | contact your state government |
| DON'T ALLOW YOUR ACCOUNT TO BE | | information-office or your |
| TRANSFERRED TO A COLLECTION | | state attorney general's |
| AGENCY THROUGH YOUR OWN | | office. |
| INACTION. Creditors use | | |
| collection agencies to goad | | If the improper conduct comes |
| the reluctant or forgetful. | | from an attorney practicing law |
| A creditor who understands | | in the collection area, contact |
| that you are overextended but | | your LOCAL BAR ASSOCIATION, and |
| doing the best you can will | | ask for the disciplinary board |
| have no reason to resort to | | or licensing agency that |
| such measures. | | receives complaints against |
| Many people are too anxious | | lawyers. They probably won't |
| or embarassed to approach a | | step in directly; however, a |
| creditor about dificulty in | | lawyer who knows that a |
| making payments. Remember that | | complaint is being checked |
| the creditor, whether a merch- | | generally takes more care to |
| ant or a banker, wants to keep | | act within legal and ethical |
| your business. An amicable | | bounds. |
| resolution is in "everyone's" | | |
| interest. | | CONSUMER CREDIT COUNCELING |
| | | AGENCIES. Frequently the |
+----------------------------------+ | problem is less one of outright |
| harassment than of anxiety and |
| increasingly short tempers on |
| both sides. A nonprofit con- |
| sumer credit counceling agency |
| has no official enforcement |
| power, but it "can" help you |
| assess your financial situation |
| and act as a mediator in making |
| more mutually suitable payment |
| arrangements. |
| |
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