Government Crackdown on Collection Agencies

Finally, government regulators are beginning to scrutinize debt collection agencies, and the banks they buy debts from; both industries use aggressive legal tactics supported by sloppy paperwork and shoddy records. Some Attorney Generals, and also the Federal Trade Commission, are starting to investigate big banks and debt collection agencies. A lot of authorities’ concerns over collection practices are similar to the issues behind the mortgage market’s collapse in 2008, the so-called robo-signing scandal. This debacle cost banks $25 billion to settle (although, they mostly wrote off the debt with Treasury Bonds, which they then devalued)—but it cost homeowners with stuck with their bad mortgages a lot more.At the forefront of the investigations is Iowa Attorney General Tom Miller, who also took the lead in the national mortgage settlement. Miller’s and other authorities are looking into the sloppy business practices commonplace to both banks and debt collection agencies; bad record-keeping misleads judges, who them make erroneous decisions in favor of the banks and debt collectors. A source familiar with the activities of the government officials had this to say: “There are egregious examples of abuse of the judicial system,” The states are “looking at the banks themselves, not just third party debt buyers.”When a consumer debt becomes delinquent for more than 180 days, banks write down the balance and try to get whatever they can; they bring collections suits against debtors or sell the rights (and the debt) to outside collection agencies. Credit card and medical debt, the biggest two kinds of individual debt, usually amount to a few thousand dollars per consumer on average; but, with big banks’ aggressive pace of consumer lending in recent decades, the total sums add up to billions of dollars a year.Other government officials are also looking into banks’ sales of defaulted accounts into the secondary market; JPMorgan Chase’s handling of credit card debt has been under investigation by Mississippi Attorney General Jim Hood and other AGs since last spring. The Consumer Financial Protection Bureau, a federal agency launched by the Dodd-Frank Act (with authority over banks and other commercial money lenders) is now examining major debt collectors. And the FTC has been tracking debt collection agency data for several years—soon, it will release a report that reveals the records debt collectors possess when making repayment demands and their relationships with banks. When banks sell debt to collection agencies (for pennies on the dollar), they provide scant and often outdated information on individual debtors; this is an industry wide practice to cut costs, and it hurts debtors.”For millions of Americans, you’d wipe clean what they owe because there might not be 10 points of documentation. Maybe there’re only four of 10,” says Mark Schiffman, vice president of ACA International, a trade association for collections agents. Banks have not furnished complete account records to debt collectors, and an abrupt requirement of exhaustive documentation “would be game over” for many in the industry. Banks give nothing away for free; they make collection agencies pay for further information on debtors. All of this is welcome news for consumers; whether or not Attorney Generals and other authorities can crack down on the most ruthless corporations in the world remains to be seen.If a collection agency has harassed you, you may be entitled to money damages up to $1,000.00, based on the FDCPA, which has been around for almost 35 years. The FDCPA is a federal law that applies to every state. In other words, everyone is protected by the FDCPA. The FDCPA is essentially a laundry list of what debt collectors can and cannot do while collecting a debt, as well as things debt collectors must do while collecting a debt. Plus, the FDCPA has a fee-shift provision. This means, the collection agency pays your attorney’s fees and costs. Founding attorney, Michael Agruss, has settled over 1,500 debt collection harassment cases. We want to help you, too.